E-Trade posts $71M 3Q profit, tops estimates
Thursday, October 20, 2011
CHICAGO (AP) — Online broker E-Trade Financial Corp. reported third-quarter profits Wednesday that surged eightfold from a year ago due to a hefty tax benefit and increased trading by its customers during a summer of high volatility in the stock markets.
The results exceeded analysts’ expectations and strengthened its return to profitability this year after several money-losing years due to bad mortgages in its banking division.
E-Trade got a big boost in the quarter from a $62 million income tax benefit for liquidating a European subsidiary.
The New York-based company reported net income of $70.7 million, or 24 cents per share, up from $8.4 million, or 3 cents per share, in the same period a year earlier.
Revenue was $507 million, up 4 percent from $489 million in the third quarter of 2010.
Analysts surveyed by FactSet had forecast earnings of 18 cents a share and revenue of $511 million.
It decreased its loan loss provision in the quarter to $98 million from $152 million a year ago.
CEO Steven Freiberg said delinquency trends in the company’s loan portfolio continue to improve and the quarterly loan provision is now down about 80 percent from its peak.
Online brokers benefit from market volatility like the turmoil this summer amid investor nervousness over the European debt crisis, the U.S. debt-ceiling showdown and the uncertain global economy. E-Trade said its daily average revenue trades were up 30 percent from a year ago at 165,000.
E-Trade, which returned to profitability this year, recently began a strategic review at the behest of its largest shareholder, hedge fund Citadel LLC, that could lead to E-trade’s sale. Prospective suitors include Schwab, TD Ameritrade and Capital One Financial Corp.
Freiberg declined to discuss the status of the review but indicated it is ongoing.
Shares in the company rose 15 cents to $9.55 in extended trading after the company reported its results. During the regular session, the stock fell 25 cents a share, or 2.6 percent, to close at $9.40.