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Online brokerage TD Ameritrade reports flat 1Q profit but beats Wall Street expectations, helped by strong growth in client assets

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OMAHA, Nebraska — TD Ameritrade Holding Corp. reported relatively flat first-quarter profit Wednesday, but executives said the online brokerage is well positioned to benefit from interest rates that have begun to rise.

The Omaha, Nebraska-based company said it earned $212 million, or 39 cents per share, during its fiscal first quarter. That's in line with last year's $211 million, or 39 cents per share.

Analysts surveyed by FactSet expected TD Ameritrade to report earnings per share of 36 cents.

The company reported revenue of $812 million, down from $819 million a year ago. Analysts expected revenue of $811.2 million for the quarter.

As interest rates increase over time, TD Ameritrade will benefit because it generates some revenue from asset-based fees it charges customers. The company said it attracted $17 billion in net new client assets in the quarter and now holds $110 billion of interest rate-sensitive assets.

In December, the Federal Reserve approved the first short-term interest rate increase since 2006. That bump was modest, but rates are expected to continue increasing gradually over time.

TD Ameritrade expects the December rate increase to boost revenue by $50 million to $80 million this year, but the company's annual profit forecast was unchanged at between $1.45 and $1.75 per share.

"We will continue along our path, investing thoughtfully in growth and building our long-term earnings power for the benefit of our clients, shareholders and associates," CEO Fred Tomczyk said.

Citi analyst William Katz said the amount of new assets TD Ameritrade attracted continued to impress, but some of the interest-based revenue was less than he expected.

TD Ameritrade's asset-based revenue grew 5 percent to $473 million in the quarter.

The other main source of TD Ameritrade's revenue — trading fees — declined to $328 million in the quarter from last year's $359 million because trading slowed. TD Ameritrade handled an average of 438,108 trades per day in the quarter, down from 457,243 a year ago.

The company cut its expenses slightly to $469 million, from last year's $475 million.

Tomczyk said trading surged to an average of 579,000 shares a day so far in January as the markets were volatile, making it hard to predict the year ahead.

"We would expect geopolitical and global economic uncertainty to continue," he said. "And the upcoming presidential election will undoubtedly have its own influence on investor sentiment and the markets."

TD Ameritrade shares declined $1.19, or 4.1 percent, to $27.74 in late morning trading. Its shares have fallen almost 16 percent over the past year.

PHOTO: FILE - In this Monday, July 16, 2012, file photo, TD Ameritrade's new corporate headquarters stands in Omaha, Neb. TD Ameritrade Holding Corp. reported relatively flat first-quarter profit Wednesday, Jan. 20, 2016, but executives said the online brokerage is well positioned to benefit from interest rates that have begun to rise. (AP Photo/Nati Harnik, File)
FILE - In this Monday, July 16, 2012, file photo, TD Ameritrade's new corporate headquarters stands in Omaha, Neb. TD Ameritrade Holding Corp. reported relatively flat first-quarter profit Wednesday, Jan. 20, 2016, but executives said the online brokerage is well positioned to benefit from interest rates that have begun to rise. (AP Photo/Nati Harnik, File)

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