TD Waterhouse Group Inc. reported brutal results for the second quarter ended April 30, reflecting the trouble online brokers are facing in this volatile market. In response, it is slashing costs, including jobs, and buying back its shares.

TD Waterhouse today announced net income for the quarter was $6.5 million, down 91% from second quarter 2000, which was a record quarter. (All figures in U.S. dollars.)

Total revenue decreased 42% from second quarter 2000, as commissions and fees declined 53% as revenue trades per day decreased 52%.

Mutual fund and related revenue grew by 19%, reflecting growth in mutual funds and FDIC Insured Money Market deposits.

Net interest declined 32% as average margin loans of $5 billion this year compared to $10 billion in the same quarter last year. Other income decreased 24% to $15 million thanks to securities losses of $5 million. Operating expenses were also 25% below second quarter last year.

“Market conditions remained volatile in the last quarter, resulting in a continued low level of trading activity by our customers. Since our revenue sources remain primarily trading and margin loans, the ensuing financial results are lower than the previous quarter. In response, the management team heightened its focus on decreasing expenses and boosting revenues,” CEO Steve McDonald said.

“Our goal is to increase annualized pre-tax income by $200 million and achieve a pre-tax, pre-goodwill, pre-marketing operating margin of 30%, the high end of the firm’s target range,” McDonald said.

“While the impact of the resulting plan in this quarter was quite modest, the cost reduction measures should yield an annualized $125 million improvement in pre-tax income by the end of the fourth fiscal quarter of 2001. Of this total, $60 million will come from decreased compensation and benefit costs primarily due to attrition and $22 million will stem from changes in our marketing spend in line with market conditions. The plan also calls for the firm to raise $50 million in annualized revenue through segmented pricing adjustments by the fourth fiscal quarter of 2001. The remaining $25 million will be realized during the first fiscal quarter of 2002.”

“Specifically, we plan to continue to take advantage of attrition to reduce the size of our global workforce; extract operating efficiencies through technology; and use segmentation to help make every customer relationship profitable-all without any significant restructuring charges,” McDonald said.

“We’ve already achieved a key benchmark. One of our goals was to reduce our headcount worldwide this quarter from 8,180 as of February 1 to 7,500 on April 30 without layoffs. We’ve exceeded this goal, with a headcount of 7,418 at the end of the quarter.”

The company will repurchase up to 3 million of its shares. “While the current environment continues to pose challenges for our customers and our business, we believe in our long-term prospects for growth,” said McDonald. “The share repurchase program that we announced today, TD Waterhouse’s first such program, reflects our commitment to enhancing shareholder value.”