E*Trade Financial Corporation (NASDAQ: ETFC) today announced results for its fourth quarter ended December 31, 2009, reporting a net loss of $67 million, or $0.04 per share, compared with a net loss of $276 million, or $0.50 per share, a year ago.
For the year ended December 31, 2009, the Company reported a loss from continuing operations of $1.3 billion, or $1.18 per share (net loss of $525 million, excluding $773 million non-cash charge on debt exchange)(1), compared to a loss from continuing operations of $809 million, or $1.58 per share, a year ago.
"2009 was a watershed year for E*TRADE, as the Company positioned itself to achieve sustainable, profitable growth by successfully recapitalizing the balance sheet and maintaining its focus on the online brokerage business," said Robert Druskin, Chairman and interim CEO, E*TRADE FINANCIAL Corporation. "The online brokerage business performed extremely well, recording its highest level of DARTs for any year and delivering strong organic growth in brokerage accounts, cash, and margin receivables."
The Company reported total DARTs of 174,000 in the fourth quarter, a 12 percent sequential quarterly decrease and a 20 percent decrease versus the same quarter a year ago. DARTs for the full year were 197,000 as compared to 188,000 in 2008.
At quarter end, E*TRADE reported 4.5 million customer accounts, which included 2.7 million brokerage accounts. Brokerage accounts decreased by 17,000 in the quarter, including a reduction of 8,000 accounts as a result of the sale of the Company's local trading business in Germany. For the full year, the Company added 115,000 net new brokerage accounts.
During the quarter, customer security holdings increased five percent, or $4.5 billion, and brokerage-related cash increased by $0.6 billion to $20.9 billion. Net new customer assets were negative $0.3 billion and were impacted by the restructuring of the Company's international operations and a $1.3 billion decline in savings and other bank-related customer deposits, as the Company continued to execute its balance sheet reduction strategy. Customers were net buyers of approximately $800 million of securities. Margin receivables increased from $3.4 billion to $3.8 billion.
U.S. net new brokerage assets were positive $1.5 billion during the quarter, reflecting the Company's strategic focus on growing the online brokerage business. For the full year, U.S. net new brokerage assets were positive $7.2 billion.
Commissions, fees and service charges, principal transactions, and other revenue in the fourth quarter were $205 million, compared with $231 million in the third quarter. This reflected the sequential decline in trading activity and a $0.19 decline in the average commission per trade due to customer mix.
Net interest income was essentially flat at $321 million, as a $459 million decline in average interest-earning assets to $43.8 billion was largely offset by a four basis point expansion in the net interest income spread.
Total operating expense increased by $17 million to $318 million from the prior quarter, primarily due to charges associated with the restructuring of the Company's international operations, seasonal advertising, and higher real estate owned (REO) expenses.
The Company continued to make progress during the fourth quarter in reducing balance sheet risk as its loan portfolio contracted by $1.1 billion from last quarter, of which $0.8 billion was due to prepayments or scheduled principal reductions.
Fourth quarter provision for loan losses decreased $55 million from the prior quarter to $292 million. Total net charge-offs in the quarter were $324 million, a decrease of $27 million from the prior quarter. Total allowance for loan losses was virtually flat at approximately $1.2 billion, or six percent of gross loans receivable. For the Company's entire loan portfolio, total special mention delinquencies (30-89 days) declined by three percent and total at-risk delinquencies (30-179 days) declined by two percent in the quarter.
The Company continues to maintain Bank capital ratios substantially in excess of regulatory well-capitalized thresholds. As of December 31, 2009, the Company reported Bank Tier 1 capital ratios of 6.69 percent to total adjusted assets and 12.79 percent to risk-weighted assets. The Bank had excess risk-based total capital (i.e., above the level regulators define as well-capitalized) of $899 million at year end.
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