E*Trade Financial Corporation (NASDAQ: ETFC) First Quarter Results:
- Net loss of $48 million, or $0.02 per share, improved from $0.04 loss in prior quarter and $0.41 loss in first quarter 2009
- Total net revenue of $537 million, up from $523 million in prior quarter and $497 million in first quarter 2009
- Provision for loan losses of $268 million, down from $292 million in prior quarter and $454 million in first quarter 2009
- Daily Average Revenue Trades (DARTs) from U.S. operations of 155,000, down two percent from prior quarter and 11 percent from first quarter 2009
- Net new brokerage assets of $2.2 billion, up from $1.5 billion in prior quarter and down from $2.3 billion in first quarter 2009
Capital and Liquidity Metrics
- Bank Tier 1 capital ratios of 6.83% to total adjusted assets and 13.08% to risk-weighted assets
- Excess risk-based total capital (excess to the regulatory well-capitalized threshold) of
- Bank generated $45 million of Tier 1 capital and $48 million of risk-based capital
- Corporate cash of $418 million
E*TRADE Financial Corporation (NASDAQ: ETFC - News) today announced results for its first quarter ended March 31, 2010, reporting a net loss of $48 million, or $0.02 per share, compared with a net loss of $67 million, or $0.04 per share, in the prior quarter and a net loss of $233 million, or $0.41 per share, a year ago. The Company reported total net revenue of $537 million for the first quarter, compared with $523 million in the prior quarter and $497 million in the year ago period.
"E*TRADE's first quarter results show improving trends and reflect continued progress toward our goal of returning to profitability," said Steven Freiberg, CEO of E*TRADE Financial Corporation. "Our online brokerage business performed well during a period of decreased market volatility, delivering growth in customer assets, accounts, and margin receivables. At the same time, improving loan performance trends supported a continued decline in the provision expense while, for the first time since early 2008, the Bank internally generated, rather than used, risk-based capital." Freiberg continued, "I am pleased to be joining the organization at a pivotal time and look forward to building on our momentum and progress as we continue to deliver increased value, innovation, and ease-of-use to customers."
E*TRADE reported DARTs from U.S. operations of 155,000 during the quarter, a two percent decrease from the prior quarter and an 11 percent decrease versus the same quarter a year ago. At quarter end, the Company reported 4.3 million customer accounts, which included 2.6 million brokerage accounts. Brokerage accounts increased by 2,000 in the quarter.
Total customer assets increased to $162 billion, from $153 billion in the prior quarter and $110 billion in the prior year.
During the quarter, net new brokerage assets were positive $2.2 billion, reflecting the Company's strategic focus on growing its online brokerage business. Customer security holdings increased seven percent, or $7.3 billion, and brokerage-related cash increased by $1.4 billion to $21.8 billion. Customers were net buyers of approximately $600 million of securities. Margin receivables increased from $3.8 billion to $4.0 billion.
Net new customer assets were positive $0.5 billion and were impacted by a $1.8 billion decline in savings and other bank-related customer deposits, including the sale of $1 billion of predominantly non-brokerage related savings accounts to Discover Financial Services, as the Company continued to execute its balance sheet reduction strategy.
Total net revenue of $537 million increased $13 million from the prior quarter and $39 million versus the year ago period.
Net operating interest income was essentially flat from the prior quarter at $320 million, as a $1.4 billion sequential decline in average interest-earning assets to $42.4 billion was offset by a 10 basis point expansion in the net interest income spread.
Commissions, fees and service charges, principal transactions, and other revenue in the first quarter were $196 million, compared with $205 million in the fourth quarter. This reflected the sequential decline in trading activity and a $0.10 decline in the average commission per trade.
Total net revenue this quarter also included $29 million of gains on loans and securities, net, offset partially by a net impairment of $9 million.
Total operating expense decreased by $23 million to $295 million from the prior quarter, including lower compensation and restructuring costs.
The Company continued to make progress during the first quarter in reducing balance sheet risk as its loan portfolio contracted by $1.0 billion from the prior quarter, of which $0.7 billion was due to prepayments or scheduled principal reductions.
First quarter provision for loan losses decreased $24 million from the prior quarter to $268 million. Net charge-offs in the quarter were $288 million, a decrease of $36 million from the prior quarter. The allowance for loan losses declined by $20 million to $1.2 billion, or six percent of gross loans receivable, at quarter end.
For the Company's entire loan portfolio, special mention delinquencies (30-89 days) declined by four percent and at-risk delinquencies (30-179 days) declined by eight percent in the quarter.
During the quarter, the Bank generated $45 million of Tier 1 capital and $48 million of risk-based capital. As of March 31, 2010 the Company reported Bank Tier 1 capital ratios of 6.83 percent to total adjusted assets and 13.08 percent to risk-weighted assets. The Bank had excess risk-based total capital (i.e., above the level regulators define as well-capitalized) of $947 million at quarter end.
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