Shares of E*Trade Financial Corp. (ETFC) declined almost 4 percent in extended trades Wednesday after the online brokerage reported results for the third quarter that missed analysts' expectations. The company also said it has agreed to sell its market making business, G1 Execution Services, to an affiliate of investment firm Susquehanna International Group, LLP for $75 million.
E*Trade reported a turnaround to profit in the third quarter, as lower expenses and a sharp decline in provision for loan losses helped offset a decline in revenue.
Paul Idzik, Chief Executive Officer of E*Trade Financial said, "Our core business delivered solid performance in the third quarter as customers continued to engage, with DARTs up 13 percent over the year-ago quarter and customer margin at a five-year high. Our consolidated results benefited from the ongoing improvement to the Company's risk profile, which contributed to our ability to distribute capital from the Bank to the Parent this quarter — a significant milestone for E*Trade."
E*Trade's net operating interest income for the third quarter declined 8 percent from last year to $240.85 million, reflecting net interest spread of 2.30 percent on average interest-earning assets of $40.8 billion. Meanwhile, total non-interest income declined 23 percent from the year-ago period to $175.96 million.
Provision for loan losses for the quarter was $37.40 million, down 73 percent from the year-ago quarter.
Daily average revenue trades or DARTs rose 13 percent from the year-ago period to 145,150. Net new brokerage accounts were 13,111 during the quarter, down from 18,247 in the prior-year quarter. Net new brokerage assets totaled $2.4 billion, up from $1.9 billion in the year-ago period.
E*Trade ended the third quarter with $240.6 billion in total customer assets, up 18 percent from $204.1 billion at the end of the year-ago quarter.
At quarter-end, the company reported 4.59 million customer accounts, up 3 percent from the end of prior-year quarter. This includes 2.98 million brokerage accounts and 1.20 million stock plan accounts.
E*trade's net income for the third quarter was $47.43 million or $0.16 per share, compared to net loss of $28.63 million or $0.10 per share in the same period last year. The year-ago quarter's results included $50 million in charge-offs related to untimely reporting of borrower bankruptcies.
On average, 14 analysts polled by Thomson Reuters expected the company to report earnings of $0.17 per share for the latest quarter. Analysts' estimates typically exclude special items.
Total net revenue for the quarter declined 15 percent to $416.80 million from $490.04 million in the year-ago period. Analysts had a consensus revenue estimate of $419.41 million for the quarter.
E*Trade said it has agreed to sell its market making business, G1 Execution Services, to an affiliate of Susquehanna International Group, LLP for $75 million. The company expects the transaction to close in three to six months.
In addition, E*Trade said it will enter into an order flow arrangement, agreeing to route 70 percent of its customer equity order flow to G1 Execution Services over the next five years.
ETFC closed Wednesday's regular trading session at $17.34, down $0.10 or 0.57 percent on a volume of 3.06 million shares. In after-hours, the stock further declined $0.66 or 3.81 percent to $16.68.
by RTT Staff Writer
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