Moody's changes outlook for Scottrade Financial to negative

Moody's Investors Service said it affirmed the Baa3 long-term issuer rating of Scottrade Financial Services, Inc. and changed the outlook to negative from stable.

The agency said the outlook change reflects Scottrade's recent weak operating performance trends. These trends may signal a weakening in the firm's core business, Moody's said, and this could lead management to increase risks in other areas to generate returns.

Scottrade's Baa3 rating recognizes its historically profitable online brokerage franchise, simple balance sheet and management's conservative financial policy, Moody's said.

However, Scottrade has been negatively affected by a challenging operating environment for retail brokers that has been characterized by reduced trading commissions and lower trading volumes, the agency added. Scottrade's pre-tax income for fiscal 2012 was 70% below the comparable period for 2011.

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