E*Trade Financial Corporation (NASDAQ: ETFC) today announced results for its second quarter ended June 30, 2007, reporting net income of $159 million, or $0.37 per share, compared to $156 million, or $0.36 per share a year ago.
The results in the second quarter of 2007 produced a 39 percent operating margin(1) including approximately $35 million of pre-tax expense, or $0.05 per share, for certain legal and previously disclosed regulatory matters related to the Company's institutional equity business. Excluding the impact of these items, the Company generated earnings of $0.42 per share and achieved a 45 percent operating margin(1). Total net revenue for the second quarter increased 9 percent year over year to a record $664 million. Net operating interest income after provision for loan losses increased 15 percent year over year to a record $384 million - representing 58 percent of total net revenue. The Company's retail client assets increased to a record $213 billion including growth in total customer cash and deposits of $1.9 billion - a more than six-fold increase versus the year ago period.
The Company also narrowed its 2007 pro-forma earnings guidance to a range of $1.58 - $1.72 per share from the previous range of $1.55 - $1.75, leaving the mid-point of $1.65 unchanged. This pro-forma range excludes the $0.05 per share of expense for certain legal and regulatory matters realized during the second quarter. Including these expenses, the Company now expects to earn $1.53 - $1.67 per share on a GAAP basis in 2007.
"Our second quarter results demonstrate the strategic and economic success we have achieved through investments in product, service and marketing over the past several years," said Mitchell H. Caplan, Chief Executive Officer, E*TRADE FINANCIAL Corporation. "We delivered record performance in the quarter while improving the overall quality of revenue and earnings through continued growth and engagement led by our high-value, target segment accounts."
Other selected recent and second quarter highlights:
- Launched Global Trading Platform, providing U.S. retail investors online access to foreign stocks and currencies in the major international markets and the ability to buy, hold and sell in the respective local currencies
- Recognized by SmartMoney magazine as the #1 premium broker (August 2007 issue)
- Produced record levels of options trades at 15.4 percent of U.S. Daily Average Revenue Trade ("DART") volumes, up 3 percentage points versus the year ago period
- Generated record quarterly Quick Transfer volume averaging over 400,000 cash transactions per month
- Expanded international business with the launch of operations in Norway and the Netherlands
- Extended branch network with three new locations: Minneapolis, Minnesota; Charlotte, North Carolina; and Houston, Texas - increasing total branches to 27 nationwide
- Repurchased over 3.1 million shares of common stock at a weighted average price of $23.30 per share
(1) Operating margin is the percentage of net revenue that results in income before other income (expense), income taxes and discontinued operations. The percentage is calculated by dividing our income before other income (expense), income taxes and discontinued operations by our total net revenue. Our second quarter results include $35 million for certain legal and previously disclosed regulatory matters related to the Company's institutional equity business. Excluding the impact of these items, operating margin was 45 percent for the quarter and consolidated segment income per customer was $84.
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