Tags: ETrade | Profit | loss | Provision

E*Trade's Profit Soars as Loan-loss Provision Falls

Wednesday, 23 April 2014 05:56 PM

E*Trade Financial Corp. reported a higher-than-expected quarterly profit on Wednesday, helped by a surge in customer trading activity and a big drop in money set aside for bad loans. The company's shares rallied on the news.

Net income at the discount brokerage company nearly tripled to $97 million, or 33 cents per share, in the first quarter, from $35 million, or 12 cents per share, a year earlier.

That handily beat analysts' average forecast of 23 cents per share, according to Thomson Reuters I/B/E/S.

The company's net revenue rose 13 percent to $475 million, also beating analysts' average estimate of $454.6 million.

E*Trade, which was on the brink of failure during the financial crisis due to its bank's subprime mortgage portfolio, set aside $4 million to cover loan losses, well below a $43 million provision in the first quarter of 2013. Its loan portfolio fell to $7.4 billion after selling $800 million of troubled residential mortgage loans during the quarter.

"Customers were overwhelmingly bullish," Paul Idzik, the company's chief executive officer, told analysts on a conference call.

He also said in a written statement: "Overall positive investor sentiment elevated brokerage activity to its highest level in nearly five years, which aided our record net new brokerage assets and brokerage account retention."

Idzik joined E*Trade in January 2013 with a mission to return the company to its discount brokerage roots. In his year at the helm he has replaced virtually his entire management team. He also oversaw the demise of the company's famous E*Trade talking baby TV ads because they were not appealing to the core constituency of investors.

Idzik has also helped restore the sustainability of the company's bank that it still uses to hold client cash.

E*Trade was helped during the first three months of the year by a return of investor enthusiasm for the stock market. Daily average trades at the company hit 198,000 in the quarter, the highest level in almost five years. Its average commission rate fell 6 percent to $10.64 per trade. Customers also bulked up E*Trade's net interest revenue by increasing margin loans by 28 percent from a year ago to $7.3 million.

Shares of E*Trade, up 117.6 percent over the past 12 months, closed 0.7 percent lower at $21.50 on the Nasdaq on Wednesday before the company released its earnings report. In aftermarket trading, the shares were up 6 percent at $22.79.

© 2021 Thomson/Reuters. All rights reserved.


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E*Trade Financial Corp.reported a higher-than-expected quarterly profit on Wednesday, helped by a surge in customer trading activity and a big drop in money set aside for bad loans. The company's shares rallied on the news.Net income at the discount brokerage company nearly...
ETrade, Profit, loss, Provision
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2014-56-23
Wednesday, 23 April 2014 05:56 PM
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