Ottawa Citizen

Lower commission­s lead to profit decline at TD Ameritrade

- BY BRADLEY KEOUN

NEW YORK • TD Ameritrade Holding Corp., the third- largest online broker, reported profit and revenue for the fiscal fourth quarter that missed analysts’ estimates as the company slashed commission­s to keep up with rivals’ price cuts.

Net income in the three months ended Sept. 29 rose 36 per cent to $ 128.1 million, or 21 cents a share, the Omaha, Nebraska- based company said yesterday. Excluding the impact of investment gains and losses, earnings per share were 20 cents.

Chief executive officer Joseph Moglia cut TD Ameritrade’s base price for trades to $ 9.99 in April from $ 10.99 after Charles Schwab Corp., the No. 1 discount broker by assets, reduced its rates by more than 60 per cent in three years. While TD Ameritrade is anticipati­ng that customers will generate more profit by paying fees for premium services, the company made less per transactio­n last quarter than many analysts expected.

Revenue rose 78 per cent to $ 488.7 million because the quarter included results for TD Waterhouse USA, the rival brokerage that Ameritrade Holding Corp. bought for $ 1.3 billion in January to create TD Ameritrade. Analysts’ revenue estimates ranged from $ 493 million to $ 517 million.

While the TD Waterhouse purchase also helped boost net income from $ 94.4 million, earnings per share declined from 23 cents because Ameritrade paid for the acquisitio­n by issuing new stock. For the full fiscal year, TD Ameritrade earned $ 526.8 million, or 95 cents a share, up from $ 339.8 million, or 82 cents, the prior year.

TD Ameritrade said it expects to earn 98 cents to $ 1.22 a share in the fiscal year ending September 2007, a change from its previous forecast of 99 cents to $ 1.21. The average estimate in the survey is for profit of $ 1.20 a share.

It’s taking longer than the company predicted to convert TD Waterhouse customers to TD Ameritrade’s trading system, Mr. Moglia said. The conversion, originally set for December, won’t be completed until March, resulting in additional costs.

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