TD Ameritrade's August DARTs Slide

On Tuesday, TD Ameritrade Holding Corporation (AMTD - Analyst Report) – an online brokerage firm – reported a fall in Daily Average Revenue Trades (DARTs) for the month of August 2012. The company’s DARTs stood at 303,000 in the reported month, slipping 9% from the prior month and 37% from the prior-year month.

Sluggish economic recovery, strict regulatory environment and investors’ cautious attitude to invest in the equity markets, were the primary reasons behind the fall in DARTs.

Broker performance is generally measured through the DARTs that represent the number of trades, from which brokers can expect commissions or fees.

For August 2012, TD Ameritrade reported $461.2 billion in total client assets, up 15% year over year and 3% compared with the prior month. Moreover, average spread-based balances increased 12% from August 2011 and 2% from July 2012, to $76.0 billion.

At the end of August, average fee-based balances were recorded at $93.4 billion, rising 18% from the prior-year month and 3% from the prior month.

Quarterly Performance

As of June 30, 2012, DARTs were 355,000, down 4% year over year. Net new client assets reported were $9.7 billion, reflecting an annualized growth rate of 9%.

TD Ameritrade reported $445 billion in total client assets, up 8% year over year. Moreover, average spread-based balances increased 18% year over year to $73.8 billion. Average fee-based balances were recorded at $88.2 billion, up 8% year over year.

Our Viewpoint

The competitive position of brokerage business in the market depends on trading customers, especially active traders. As the group of long-term investors is less developed than that of the trading customers, there is a chance of future growth if the former expands.

Innovations in online trading and long-term investing products and services, delivery of advanced customer service, creative as well as cost-effective marketing and sales along with expense discipline can be considered as the key factors behind TD Ameritrade’s strategy of boosting its trading and investing business.

Amidst a volatile operating environment, TD Ameritrade witnessed a rise in organic client asset. However, the company’s trading volumes declined, which remains a matter of concern. Further, a low interest rate and stringent regulatory environment are expected to be the dampeners in the future.

TD Ameritrade currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

Among TD Ameritrade’s peers, Charles Schwab Corp. (SCHW - Analyst Report) and E*TRADE Financial Corporation (ETFC - Analyst Report) are anticipated to release their Monthly Activity Report for August, later this week.