TD Ameritrade profit down, cuts view

NEW YORK (Reuters) - TD Ameritrade Holding Corp said on Tuesday quarterly earnings dropped 23 percent, in line with expectations, and the online broker lowered its 2009 earnings forecast because of a dark economic outlook.

Shares of the second-biggest U.S. discount broker fell more than 8 percent in early trading, even as analysts said Ameritrade's results suggest it has been able to attract financial advisers that have abandoned full-service brokerages shaken in the credit crisis.

The company logged $7.8 billion in net new assets in the quarter, nearly triple what it attracted in the previous quarter.

Still, interest rates near zero have hampered Ameritrade's ability to earn profits from assets. The company now expects to earn between 90 cents and $1.15 per share this year, down from the $1.10 to $1.42 per share it forecast three months ago.

"While we did expect a difficult market when we gave our guidance last quarter, none of us envisioned the kind of economic and market environment we are now seeing," Fred Tomczyk, the chief executive, told analysts and media on a conference call.

The company said the economy may not strengthen until 2010, but boosted its outlook for 2009 daily average client trades.

"We expect the stock to underperform its closest peers today, but Ameritrade should still do better than the broader financial universe given its lack of credit exposure," Fox-Pitt Kelton analyst David Trone wrote in a note to clients.

Ameritrade's trading revenue in the fiscal first quarter that ended December 31, jumped 10 percent. The period included the most volatile phase of last year's market selloff.

The provider of Internet-based brokerage and financial services earned $184.4 million, or 31 cents per share, in the quarter, down from $240.8 million, or 40 cents per share, a year earlier. Revenue fell 5 percent to $610.7 million.

Ameritrade, which leads all peers in trading, said fee-generating trading declined about 15 percent from November to December, signaling what many industry analysts see as the beginning of an overall trading volume drop.

BENEFITING FROM TURMOIL

There are already signs that consolidation among big broker-dealers, such as Morgan Stanley and Citigroup , will drive business to discount brokers, which offer custodial services for investment advisers.

"It's a good quarter with strong net new asset growth," said Richard Repetto, an analyst at Sandler O'Neill. "They look to be benefiting from the turmoil at the large investment banks."

Tomczyk said Ameritrade will continue to "take advantage of the current dislocation in the market," but warned there could be a "lull" in the stream of advisers considering moving to Ameritrade.

Although it attracted new assets in the latest quarter, Ameritrade said it had $233.8 billion in total assets at year's end, down 16 percent from the previous quarter and down 22 percent from a year ago.

Ameritrade earlier this month agreed to buy options specialist thinkorswim Group Inc for $606 million, a takeover intended to boost Ameritrade's industry-leading trading business, but which does little to build assets.

Ameritrade has said it wants to rely less on trading and more on asset gathering, where larger online rival Charles Schwab Corp has a wide advantage.

Ameritrade's shares dropped $1.00 to $11.65 on the Nasdaq. They lost 29 percent in 2008, a year in which the credit-inspired meltdown rocked financial stocks.

Last week, Schwab reported a small quarterly profit rise, beating expectations. Schwab's shares were off 15 cents, or 1 percent, at $14.69 on Tuesday.

Toronto-Dominion Bank is Ameritrade's largest investor.

(Editing by John Wallace and Maureen Bavdek)