E*Trade Financial Corp. (ETFC) swung to a third-quarter profit
as the online brokerage firm reported higher daily average revenue
trades, sharply lower loan-loss provisions and more controlled
expenses.
However revenue missed the estimates of analysts polled by
Thomson Reuters.
E*Trade also disclosed that it will sell its G1 Execution
Services market-making unit to Susquehanna International Group, LLP
for $75 million. The unit handles the stock orders of individual
investors that come in through the discount brokerage's online
portal, as well as orders from other online brokers.
E*Trade had been aiming to hammer out a deal to sell G1 amid
regulatory scrutiny of its order routing practices. Under the deal
with Susquehanna--expected to close in three to six months--E*Trade
will route 70% of its customer equity order flow to G1 over the
next five years.
Chief Executive Paul Idzik in a prepared statement said the deal
will allow E*Trade "to concentrate our time and attention on the
core business and our customers."
E*Trade reported a profit of $47.4 million, or 16 cents a share,
compared with a year-earlier loss of $28.6 million, or 10 cents a
share. Revenue plunged 15% to $416.8 million as the brokerage
reported an 85% drop in gains on loan and securities.
Analysts polled by Thomson Reuters most recently projected
earnings of 16 cents on revenue excluding loan loss provisions of
$419 million.
On the trading front, E*Trade posted daily average revenue
trades of 145,000 up 13% from a year earlier, but down 3% from the
second quarter.
Commissions, fees and service charges, principal transactions,
and other revenue in the third quarter were $164 million, compared
with $177 million in the prior quarter and $153 million in the
third quarter of 2012. Average commission per trade for the quarter
was $11.15, compared with $11.10 in the prior quarter, and $11.24
in the year-earlier quarter.
In the latest quarter loan-loss provisions were down sharply to
$37.4 million from $141 million a year earlier. The year-earlier
period included $50 million related to loan charge-offs associated
with newly identified bankruptcy filings.
Meanwhile net charge-offs of $29 million were at the lowest
level since early 2007 for E*Trade.
The brokerage also showed progress on tightening expenses.
Operating expenses fell 6.3%, driven by declines in compensation
among other items.
E*Trade also reported that its corporate cash ended the period
at $373 million, an increase of $122 million from the prior period,
driven primarily by a $100 million dividend distributed from the
bank to the parent company during the quarter.
The brokerage firm in September said it had received regulatory
approval to stream $100 million from its bank to the parent
company, while also disclosing plans to seek approval for future
distributions of $100 million per quarter.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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