E*TRADE Financial Corporation (ETFC) today announced results for its second quarter ended June 30, 2014, reporting net income of $69 million, or $0.24 per share.
This compares with net income of $97 million, or $0.33 per share in the prior quarter, and a net loss of $54 million, or $0.19 loss per share in the second quarter of 2013. Total net revenue of $438 million decreased from $475 million in the prior quarter, and $440 million in the second quarter of 2013.
"We had a successful second quarter, characterized by continued growth in the brokerage business, even as trading activity moderated industrywide," said Paul Idzik, Chief Executive Officer. "Through the first half of the year we have already surpassed the previous year's total for net new brokerage accounts, margin loan balances remained near record highs, and total customer assets have again reached all-time highs. We also continued strengthening the franchise through the closing of our TDR sale and the receipt of our fourth consecutive quarterly dividend from our bank to our parent, while completing our first-ever round of Dodd-Frank Act Stress Tests."
E*TRADE reported DARTs of 155,000 during the quarter, a decrease of 22 percent from the prior quarter and an increase of four percent versus the same quarter a year ago.
The Company ended the quarter with 3.1 million brokerage accounts, an increase of 33,000 from the prior quarter. This compared with 72,000 net new brokerage accounts in the prior quarter and 30,000 in the second quarter of 2013. Brokerage account attrition for the quarter was 8.6 percent annualized.
The Company ended the quarter with $281 billion in total customer assets, compared with $269 billion at the end of the prior quarter and $220 billion from the year-ago period.
During the quarter, customers added $1.0 billion in net new brokerage assets, representing an annualized growth rate of 1.8 percent. Brokerage related cash decreased by $0.1 billion to $40.0 billion during the period. Customers were net buyers of approximately $0.4 billion of securities. Margin receivables averaged $7.3 billion in the quarter, up six percent over last quarter and up 28 percent year over year, ending the quarter at $7.3 billion.
Corporate cash ended the quarter at $570 million(1), an increase of $45 million from the prior quarter, driven primarily by a $75 million dividend distributed from the Company's bank subsidiary to its parent during the quarter.
Net operating interest income for the second quarter was $270 million, up from $266 million in the prior quarter and $243 million a year ago. Second quarter results reflected a net interest spread of 2.55 percent on average interest-earning assets of $41.4 billion, compared with 2.47 percent on $42.1 billion in the prior quarter. The sequential decrease in average interest-earning assets was driven primarily by customer net buying and the scheduled expiration of $600 million of wholesale borrowings during the quarter(2).
Commissions, fees and service charges, and other revenue in the second quarter were $161 million, compared with $184 million in the prior quarter and $156 million in the second quarter of 2013. Average commission per trade for the quarter was $10.72, compared with $10.64 in the prior quarter, and $11.10 in the second quarter of 2013.
Total net revenue in the quarter also included $7 million of net gains on loans and securities, including gains related to the completion of the sale of modified loans. This compared with $15 million in the prior quarter, and $21 million in the second quarter of 2013.
Total operating expenses in the quarter of $284 million decreased $6 million sequentially and decreased $130 million from the year ago period, which included a goodwill impairment charge of $142 million.
The Company's loan portfolio ended the quarter at $7.1 billion,contracting approximately $0.3 billion from the prior quarter. Second quarter provision for loan losses of $12 million was up from $4 million in the prior quarter, which included an $11 million benefit from a settlement with a third party mortgage originator.
Net charge-offs in the quarter were $14 million, compared with $54 million in the prior quarter which included $42 million related to the transfer of one- to four-family TDRs to held-for-sale at the end of the prior quarter, and an $11 million benefit related to a settlement with a third party mortgage originator. Excluding these items, net charge-offs were down $9 million compared to the previous quarter. The allowance for loan losses ended the quarter at $401 million, down $2 million from the previous quarter.
As of June 30, 2014, the Company reported bank and consolidated Tier 1 leverage ratios of 10.2 percent(3) and 7.5 percent(4), respectively, compared with 9.7 percent(3) and 7.0 percent(4) in the prior quarter.
Full figures available here.