Shares of retail brokers down following earnings

Shares of retail brokers down following disappointing earnings reports

• On 2:10 pm EDT, Wednesday October 28, 2009

NEW YORK (AP) -- Shares of retail brokerages were lower Wednesday after two of the industry's powerhouses posted weaker quarterly results, and analysts noted the companies face ongoing risks.

E-Trade Financial Corp. shares were down 8 cents, or 5 percent, to $1.49 in afternoon trading, but recovered from $1.41 hit earlier in the day.

Ameritrade stock fell 26 cents, or nearly 1.4 percent, to $19.01, up from $18.59. Charles Schwab Corp was down a penny at $17.71 after dipping to $17.55 earlier in the day

On Tuesday, TD Ameritrade Holding Corp. said lower interest rates and rising expenses sent its profit down 9 percent compared with a year ago. However, the company said it handled 35 percent more trades per day on average and its trading-based revenue soared almost 38 percent in its fourth fiscal quarter.

E-Trade meanwhile said its loss widened in the latest quarter as a result of a hefty charge it took to shore up its capital position. The firm has been slammed by the credit crisis because of its investments in real estate loans and bonds backed by the troubled assets.

The company noted that its core business appears healthy, with total daily average trades up 7 percent from a year ago.

Despite the positive signs, Deutsche Bank analyst Michael Carrier affirmed his "hold" ratings on E-Trade and Ameritrade.

Carrier noted there were limited upsides for E-Trade in the near term, and that further deterioration in credit trends and issues with the capital restructuring plan pose ongoing risks for the firm.

And while Ameritrade's core trends are holding up well, Carrier noted that that there were pressures on revenue from rates and funded accounts.

In a note to investors about E-Trade, FBR Capital Markets analyst Matt Snowling wrote that "the worst is behind the company" and affirmed his "outperform" rating and $2.25 price target on the firm's stock.

But Snowling also noted that a downturn in the equity markets could discourage investors, and lower trading volumes and revenue.

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