E*TRADE Financial Corporation Announces Third Quarter 2015 Results 

E*TRADE Financial Corporation has issued a press release to announce the results for its third quarter ended September 30, 2015.

The Company reports that:

Third Quarter Results
• Net loss of $153 million, or $0.53 per diluted share
• Adjusted net income of $98 million(1), or $0.33 per diluted share(1), excluding charges related to the termination of the Company’s $4.4 billion of wholesale funding obligations
• Total adjusted net revenue of $443 million(1), excluding $370 million of losses related to the termination of wholesale funding obligations
• Allowance for loan losses of $376 million resulting in a benefit to provision for loan losses of $25 million

E*TRADE reporting a net loss of $153 million, or $0.53 per diluted share. This compares to net income of $292 million, or $0.99 per diluted share, in the prior quarter and net income of $86 million, or $0.29 per diluted share, in the third quarter of 2014. The third quarter included charges related to the termination of wholesale funding obligations of $413 million pre-tax, or $251 million after tax. Excluding these charges, net income would have been $98 million(1), or $0.33 per diluted share(1). This compares
with adjusted net income of $72 million(1), or $0.25 per diluted share(1) in the prior quarter which excluded an income tax benefit related to finalizing an IRS audit. Total net revenue of $73 million includes $370 million of losses related to the termination of wholesale funding obligations. Excluding these losses, net revenue would have been $443 million(1) compared to $445 million in the prior quarter and $440 million in the third quarter of 2014. “The third quarter was positive for E*TRADE as our customers remained active in the midst of overall market uncertainty, our risk profile continued to improve, and we took another important
leap forward on the capital front,” said Paul Idzik, Chief Executive Officer. “Increased customer  trading activity – during what is typically a seasonally slow quarter – was punctuated by an alltime record day in August when we executed 394,000 trades. Our legacy loan portfolio continued its march toward extinction, with third quarter performance that led us to lower reserves. During the quarter we successfully deployed excess capital to eliminate high-cost legacy wholesale funding – a transaction that provides an immediate boost to our earnings power and creates capacity to on-board more valuable customer deposits – an opportunity that we have already begun to seize. As we near the end of 2015, I am optimistic about the opportunities for our business coupled with our ability to continue putting capital to work for our owners.”

E*TRADE also announced that its President, Navtej S. Nandra, will depart at the end of this year. The Company does not intend to replace the position. In connection with his departure, the Company will record a charge of approximately $6 million in the fourth quarter. E*TRADE reported DARTs of 156,000 during the quarter, an increase of 4 percent from the prior quarter and an increase of 2 percent versus the same quarter a year ago.

The Company ended the quarter with 3.2 million brokerage accounts. Net new accounts in the quarter were 19,000(2) which compares to 25,000(2) accounts in the prior quarter and 24,000 accounts in the third quarter of 2014. Brokerage account attrition for the third quarter was 9.3 percent annualized(2).

The Company ended the quarter with $277 billion in total customer assets, compared with $302 billion at the end of the prior quarter and $282 billion from a year ago.

During the quarter, customers added $2.1 billion in net new brokerage assets. Brokerage related cash decreased by $1.8 billion to $40.2 billion during the third quarter as customers were net buyers of approximately $3.7 billion of securities. Margin receivables averaged $8.0 billion in the quarter, down 1 percent from the prior quarter and up 5 percent year over year,
ending the quarter at $7.9 billion.

Corporate cash ended the quarter at $432 million(3) , an increase of $26 million from the prior quarter, which included a $30 million dividend from E*TRADE Securities.

Net operating interest income(4) for the third quarter was $263 million, down from $267 million in the prior quarter and $265 million a year ago. Third quarter results reflected a net interest spread of 2.58 percent on average interest-earning assets of $40.4 billion, compared with 2.50 percent on $42.3 billion in the prior quarter and 2.54 percent on $41.3 billion in the third quarter
of 2014.

Commissions, fees and service charges(4) , and other revenue in the third quarter were $170 million, up from $167 million in both the prior quarter and the third quarter of 2014. Average commission per trade for the quarter was $10.87, compared with $10.96 in the prior quarter and $11.05 in the third quarter of 2014. Total net revenue in the quarter also included $10 million of
net gains on securities and other. This compared with $11 million in the prior quarter and $8 million in the third quarter of 2014.

Total operating expenses in the quarter of $293 million decreased $16 million sequentially, and increased $16 million from the year ago period. The prior quarter included $6 million of executive severance and $9 million related to a third party contract amendment.

Losses on early extinguishment of debt of $39 million included a $43 million loss associated with the termination of wholesale funding obligations, offset by a $4 million gain related to the repurchase of $14 million of trust preferred securities.

The Company’s total assets ended the quarter at $41.2 billion, a decrease of $5.9 billion from the prior quarter. The decrease was driven by the termination of wholesale funding obligations as well as reductions in deposits and customer payables.

The Company’s loan portfolio ended the quarter at $5.3 billion, contracting approximately $0.4 billion from the prior quarter. Net charge-offs in the quarter were $1 million compared with $3 million in the prior quarter and $10 million in the third quarter of 2014. The allowance for loan losses ended the quarter at $376 million, down from $402 million in the prior quarter and $401 million in the third quarter of 2014. The decrease in the allowance resulted in a benefit to provision for loan losses of $25 million which compared with a provision for loan losses of $3 million in the previous quarter and $10 million in the third quarter of 2014.

As of September 30, 2015, the Company reported bank and consolidated Tier 1 leverage ratios of 9.2 percent(5) and 8.5 percent(6) , compared with 9.8 percent(5) and 8.5 percent(6) in the previous quarter.

Source: E*TRADE Financial Corporation – E*TRADE Financial Corporation Announces Third Quarter 2015 Results

 

 

 

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