OMAHA, Neb. (AP) — Online brokerage TD Ameritrade said Tuesday that its fiscal third-quarter profit jumped nearly 20 percent as trading activity surged and interest rates rose.
The Omaha, Neb.-based company said it generated $184 million in net income, or 33 cents per share. That's up from $154 million, or 28 cents per share, in the April-June period of 2012.
Revenue rose 9 percent to $725 million.
Analysts polled by FactSet predicted profit of 31 cents per share on revenue of $707 million.
Ameritrade's stock added 93 cents, or 3.6 percent, to $26.98 in midday trading. It hit a 14-year high of $27.50 Tuesday morning and is up 61 percent this year.
Ameritrade said trading revenue rose 21 percent to $321 million, as the average number of trades it handled per day grew 12 percent to 399,216. The company's average commission grew to $12.57 from $11.88.
CEO Fred Tomczyk predicted that trading activity will pick up when the Federal Reserve starts to reduce its economic stimulus programs because volatility will pick up, but many individual investors remain cautious.
"Right now the memories of the Great Recession are still fresh in a lot of people's minds," Tomczyk said on a conference call with analysts.
Besides trading commissions, Ameritrade generates revenue from assets it holds for clients and fees for advice. The current low interest rates have limited how much Ameritrade has earned from those asset-based fees, but officials said it looks like that is beginning to change.
Ameritrade's asset-based revenue grew 2 percent to $384 million as interest rates crept higher. Tomczyk said the company is reviewing its strategy for investing client assets as interest rates rise, but it's nice to continue facing the headwind of near-zero interest rates.
Ameritrade also collected $65 million from fees for advice and investment products in the quarter, up from $54 million a year ago.
Aside from rising interest rates, Ameritrade benefited from controlling costs, said Sterne Agee analyst Jason Weyeneth. Ameritrade's expenses grew 3 percent to $427 million.
The company is performing well, but its recent share price gains already reflect that, said Credit Suisse analyst Howard Chen in a research note. He remains neutral on the stock.
Ameritrade officials said results in the current quarter will be helped by a one-time gain of $54 million, or 6 cents per share, from its investment in Knight Capital Group. The trading firm was bought by Getco Holding Co. for $1.4 billion earlier this month, creating a trading company called KCG Holdings Inc.
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TD Ameritrade Holding Corp.: www.amtd.com