TD Ameritrade poised for growth once interest rates rise

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The difficult global economic environment facing TD Ameritrade will continue for at least the next two years, company leadership said Tuesday at the firm's annual stockholder meeting in Omaha.

The U.S. housing market remains in a slump. European debt issues have caused economic uncertainty, leaving investors cautious and not logging trades as often through the Omaha-based online brokerage. And the 2012 presidential election and the political back-and-forth will stir economic worries, said Joe Moglia, board chairman and former chief executive officer of the online brokerage and financial services holding company.

"Our (U.S.) economy is strong. Our economy is getting better. We're going to be fine. We're going to be OK," Moglia said. "The issue is: We're not going to be out of the woods until the European crisis winds up getting solved and until the housing market in the United States starts to stabilize."

But TD Ameritrade brass insist the company is going to continue to focus on the things it can control, including acquiring and holding client assets — positioning itself for significant growth when interest rates inch up from the current record low levels set by the U.S. Federal Reserve Bank.

Last month, the Fed said that those rates won't see any movement until at least 2014. That announcement wasn't welcomed by TD Ameritrade, which at the end of January held $426.3 billion in total client assets that could be growing at a better pace if interest rates were higher.

The company's earnings would be more than doubled if short-term interest rates were between 4 percent and 4.5 percent, said Fred Tomczyk, the company's chief executive and president. The rates are currently below 1 percent.

At the start of the Great Recession in 2008, Tomczyk said TD Ameritrade's management team was prepared for two or three years of interest rates at record-low levels. It wasn't expecting six or seven years of low rates.

"That is not a good environment for our business," Tomczyk said. "That's a difficult environment for those of us in the brokerage business in the United States."

Despite the challenges, TD Ameritrade has broken asset-gathering records for the last three years and the company's stock is outperforming industry competitors, Tomczyk said.

Also during the meeting, held at the Downtown Omaha Hilton Hotel, the company's stockholders, including Toronto-Dominion Banks, which owns 45 percent of the company, approved three measures, including an executive compensation plan that awarded Tomczyk about $6 million in compensation for fiscal 2011, about the same as his payout a year ago.

Contact the writer:

402-444-1414, ross.boettcher@owh.com

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