E*Trade Profit Slides as Investors Stay on Sidelines

Thursday, 19 Jul 2012 06:46 PM

 

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E*Trade Financial Corp's profit fell in the latest quarter as concerns over a difficult economic environment kept many investors on the sidelines.

The online brokerage said on Thursday its second-quarter net income dropped to $39.5 million, or 14 cents a share, from $47.1 million, or 16 cents a share, a year earlier.

The company said its results included a benefit of about 4 cents from a few unique items in other expenses and taxes.

Revenue declined to $452.4 million from $517.6 million in the year-ago period.

Analysts, on average, expected the New York-based firm to earn 11 cents per share on revenue of $457.4 million, according to Thomson Reuters I/B/E/S.

Trading volumes, which account for around 30 percent of E*Trade's revenues, slumped in the quarter.

"We continue to face a challenging macroeconomic environment with low levels of retail investor engagement," Steven Freiberg, E*Trade's chief executive, said in a statement.

"Accordingly, we are increasing our focus on strategic cost management, deleveraging, and risk reduction."

Daily client revenue trades fell 6 percent from a year earlier to an average of 138,653 a day.

Commissions, fees and service charges, principal transactions, and other revenue were $154 million, compared with $174 million in the second quarter of 2011.

Average commission per trade fell 4 percent to $10.68.

Operating expenses fell to $303.8 million from $312.6 million a year earlier.

E*Trade continues to chip away at an outsized portfolio of soured mortgage loans, which pummeled its balance sheet and profits when the housing market collapsed in 2007.

The company said that during the most recent quarter, loan-loss provisions fell to $67.3 million, from $71.9 million a year earlier.

Loans in E*Trade's home equity portfolio that were 30 to 89 days delinquent -- seen as the company's greatest exposure to loan losses -- were down 10 percent from the previous quarter, and down 21 percent from a year earlier.

Clients opened around 46,000 net new brokerage accounts, flat from the prior quarter, and up from 25,000 a year earlier. At quarter's end, E*Trade had 4.4 million customer accounts, including 2.9 million brokerage accounts.

Net new brokerage assets rose by $2.2 billion during the quarter.

E*Trade had $193 billion in total customer assets, versus $186 billion in the year-ago period.

Shares of E*Trade, which reported its results after the regular market closed, were 5 cents lower at $7.77 in afterhours trade, having dropped 1 percent to $7.82 in the regular session. The company dropped 26.6 percent last quarter. The shares hit a 52-week low of $7.39 on July 12.

© 2014 Thomson/Reuters. All rights reserved.

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