Knight Capital 4Q net income dips as trading slows

JERSEY CITY, N.J. (AP) -- Knight Capital Group Inc.'s net income plunged in the fourth quarter as it handled fewer stock trades and took big one-time charges.

The trading firm, based in Jersey City, N.J., said Thursday that the results were better than Wall Street estimates. Shares were roughly flat in early trading.

Knight's net income for the three months ended Dec. 31 fell to $5.2 million, or a penny per share, from $40.2 million, or 43 cents per share, in the same period a year earlier.

The decline was caused in part by a steep decline in trading activity. On average in the fourth quarter, Knight each day processed 2.8 million trades worth $20.6 billion. In the same period of 2011, it processed a daily average of 3.6 million trades worth $23.2 billion.

Knight takes stock trading orders from big brokers like TD Ameritrade and E-Trade. It routes the orders to exchanges including the New York Stock Exchange.

Revenue in the fourth quarter fell 16 percent, to $287.7 million from $341.3 million in the same period a year earlier.

Aside from marketwide trends, the results reflect Knight's weakened position since August, when a software glitch in its trading platform flooded the market with orders, causing dozens of stocks to fluctuate wildly.

In the third quarter, Knight took a $461.1 million financial loss on the event and another $143 million charge to reflect its weaker brand and competitive position after the episode. Those costs nearly sank the company.

Knight announced in November that it would merge with rival Getco LLC in a deal that valued Knight shares at $3.50 — a 41 percent premium over the closing price before the deal was reported. Still, it was a fraction of Knight's value since the market meltdown.

In the fourth quarter, the company took more big charges. It wrote down $11.4 million on a strategic investment and another $7.7 million for professional fees related to the Getco merger and the August glitch.

Excluding one-time items, Knight said it earned $18.9 million, or 5 cents per share.

The results were better than Wall Street had expected. Analysts surveyed by FactSet expected adjusted income of 3 cents per share on revenue of $275 million.

For the full year 2012, Knight lost $722.7 million, or $6.05 per share, on revenue of $736.1 million.

Knight shares fell a penny to $3.68 in morning trading.