Tags: ETrade | Profit | Falls | 78percent

E*Trade Profit Falls 78%

Thursday, 18 April 2013 06:36 PM

E*Trade Financial Corp. on Thursday reported progress in winding down its loss-plagued bank lending businesses and buffering its core discount brokerage business.

The New York-based company said first-quarter net income fell 78 percent from a year earlier to $35 million, or 12 cents a share, but improved from a loss of $186.1 million in last year's fourth quarter.

"The first quarter was encouraging, as we posted solid sequential growth in customer engagement, accounts and assets," Chief Executive Officer Paul Idzik said in a prepared statement.

Idzik joined in January as E*Trade's sixth CEO since 2009, a sign of the turmoil that has battered the firm.

The company's earnings per share matched the average estimate of 17 analysts reviewed by Thomson Reuters I/B/E/.

E*Trade's revenue, however, missed analysts' consensus because of lower-than-expected gains on sales of loans and securities and lower net interest income as short-term rates fell and the company's balance sheet shrank. The company reported first-quarter revenue of $419.9 million against an average forecast of $438.6 million.

Profit was driven by 30,000 new brokerage accounts in the quarter, $3.1 billion in new customer assets and commission-generating daily trades that grew 16 percent from the fourth quarter of 2012.

Operating expenses jumped $10 million from the fourth quarter to $296 million, including $12 million in severance and restructuring costs.

E*Trade's chief marketing officer and its head of technology both left the company after Idzik's arrival, along with dozens of other employees.

Three board members also are stepping down before the company's annual meeting in May, including Citadel LLC founder Kenneth Griffin. Citadel, which had been lobbying for years to sell the company, was E*Trade's biggest shareholder until it sold its remaining 9.6 percent stake in March.

E*Trade's provision for loan losses fell to $43 million from $74 million in the fourth quarter, a sign of a contraction in its bad loans. It also trimmed its balance sheet more than expected, causing net operating interest income to fall to $241 million from $285 million a year ago.

Through loan sales and deposit transfers, total assets fell $2.4 billion during the quarter to $45 billion, bringing the company close to its long-term goal of reducing assets by $8.5 billion. It expects to hit the goal this quarter after transferring $500 million of customer cash to an outside bank, a company official said.

E*Trade's Tier One leverage ratio, a key measure of its capital strength that is being closely watched by investors, rose to 9.3 percent of assets from 8.7 percent a year ago. The company has asked regulators to let the bank move excess cash to its holding company when the ratio reaches 9.5 percent, giving it cash for growth at the brokerage firm and for potential distribution to investors through dividends or share buybacks.

Shares of E*Trade, up 6.6 percent since the beginning of the year, gained another 3.8 percent after the results were released on Thursday following the close of the U.S. stock market.

© 2019 Thomson/Reuters. All rights reserved.

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E*Trade Financial Corp. on Thursday reported progress in winding down its loss-plagued bank lending businesses and buffering its core discount brokerage business.
Thursday, 18 April 2013 06:36 PM
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