StockBrokers.com continues to keep a close eye on the publicly-traded online brokers quarterly earnings reports. The third quarter earnings releases are now complete, so it’s time to take a look at how each company fared in the quarter. Online brokers faced a tough environment in the quarter, and some brokers were able to cope with that environment better than others. Let’s take a look at results from E*TRADE (ETFC), TD Ameritrade (AMTD), Charles Schwab (SCHW), and Interactive Brokers (IBKR).

How were the quarterly profits compared to the same quarter in 2011? E*TRADE actually lost 10 cents per share in the third quarter, compared to a profit of 14 cents per share in the second quarter of 2011. Interactive Brokers reported 26 cents per share in the quarter, compared to a profit of 48 cents per share in 2011. Charles Schwab earned 19 cents per share in the quarter, which was actually a slight increase from their 18 cent figure in the same quarter a year ago. TD Ameritrade reported net income of 26 cents per share in the quarter versus a profit of 29 cents per share in the third quarter of 2011.

E*TRADE 2012 3rd Quarter Earnings Fast Facts:

Missed analysts estimates by 19 cents per share.

The 9 cent loss was largely because the provision for loan losses jumped

Net new brokerage assets were $1.9 billion, compared to 2.6 billion a year ago

Daily Average Revenue Trades (DARTs) decreased a whopping 22 percent

Analysts didn’t see the jump in the provision for loan losses coming, but more concerning for the broker is the huge drop in DART’s. All online brokers have been hit hard by the reduction in trades, but E*TRADE is leveraged slightly more to this than most brokers. On the positive side, E*TRADE saw its average commission per trade rise to $11.24 from $10.68 in the second quarter. The company ended the quarter with $204 billion in total customer assets.

Interactive Brokers 2012 3rd Quarter Earnings Fast Facts:

DART’s dropped 19 percent from a year ago

Missed analysts estimates by 9 cents per share

Pretax profit margin for the company was just 48 percent this quarter

The company earned 30 percent less from its market making business

There wasn’t much positive in this quarterly earnings report. Lower volatility and lower exchange traded volumes led to the company not earning nearly as much from its market making business. Pretax profit margins were 55 percent a year ago, but they were only 48 percent this quarter. DART’s dropped 19 percent, which really cut into the company’s bottom line profits. Customer equity did increase by 35 percent compared to a year ago. In addition, the company announced a quarterly dividend of 10 cents per share.

Charles Schwab 2012 3rd Quarter Earnings Fast Facts:

Earnings beat analysts estimates by two cents per share

Schwab now has 8.7 million active brokerage accounts

Total client assets grew to a record $1.89 trillion as of the end of September

DART’s were down 22 percent from the same quarter a year ago

Charles Schwab was able to beat analysts estimates by a couple pennies per share. Schwab’s diversified approach seems to be helping them weather the storm right now. This is an online broker with a much more diversified revenue stream than most in the industry. Charles Schwab Bank added 844,000 accounts in the quarter, which was 10 percent more than it added a year ago. Trading revenues declined in a big way here, but they were able to offset those losses with gains in the asset management and retail advisory services. For the nine months ended in September, Schwab’s net income is 2 percent higher than it was a year ago.

TD Ameritrade 2012 3rd Quarter Earnings Fast Facts:

Beat analysts estimates by a penny per share

DART’s fell 21 percent from a year ago

Net new client assets were $10.1 billion, compared to $12.4 billion last year

Total client assets jumped by 25 percent to $472 billion

TD Ameritrade was able to beat analysts estimates by a penny, but profits fell three cents a share from the same time last year. Just as all the other online brokers were, TD Ameritrade was hit by a large drop in DART’s this quarter. Net new client assets were a bit disappointing, but TD Ameritrade’s total client assets unexpectedly jumped 25 percent from a year ago. TD Ameritrade announced a 50 percent increase in their quarterly dividend. Shareholders will now receive 9 cents per share from TD Ameritrade. The company also updated its 2013 outlook. They said they expect to earn between $1.00 per share and $1.20 per share, which is right in line with analysts estimates.

Conclusion

There’s no doubt that the third quarter was a tough one for online brokers overall. Two of the four companies in this review missed analysts estimates badly, while two squeaked past estimates. The brokers who have been able to hold their own during this period are the ones who have more diversified revenue streams. You can bet that all of the online brokers are hoping for an increase in DART’s in the coming quarter. StockBrokers.com will revisit earnings from this key sector again next quarter!