Fourth Quarter Results
* Total net revenue of $523 million
* Provision for loan losses of $292 million
* Net loss of $67 million, or $0.04 loss per share
* Total Daily Average Revenue Trades (DARTs) of 174,000
* Brokerage accounts of 2.7 million
Full-Year 2009 Performance
* Total net revenue of $2.2 billion
* Provision for loan losses of $1.5 billion
* Net loss of $1.3 billion, or $1.18 per share (net loss of $525 million, excluding $773 million non-cash charge on debt exchange)(1)
* Record DARTs of 197,000
* Raised $765 million in gross proceeds from common stock issuances
* Completed $1.74 billion debt exchange
Capital and Liquidity Metrics
* Bank Tier 1 capital ratios of 6.69% to total adjusted assetsand 12.79% to risk-weighted assets
* Excess risk-based total capital (excess to the regulatory well-capitalized threshold) of $899 million
* Corporate cash of $393 million
E*TRADE FINANCIAL Corporation (NASDAQ: ETFC) today announced results for its fourth quarter ended December 31, 2009, reporting a net loss of $67 million, or $0.04 per share, compared with a net loss of $276 million, or $0.50 per share, a year ago. For the year ended December 31, 2009, the Company reported a loss from continuing operations of $1.3 billion, or $1.18 per share (net loss of $525 million, excluding $773 million non-cash charge on debt exchange)(1), compared to a loss from continuing operations of $809 million, or $1.58 per share, a year ago.
“2009 was a watershed year for E*TRADE, as the Company positioned itself to achieve sustainable, profitable growth by successfully recapitalizing the balance sheet and maintaining its focus on the online brokerage business,” said Robert Druskin, Chairman and interim CEO, E*TRADE FINANCIAL Corporation. “The online brokerage business performed extremely well, recording its highest level of DARTs for any year and delivering strong organic growth in brokerage accounts, cash, and margin receivables.”
The Company reported total DARTs of 174,000 in the fourth quarter, a 12 percent sequential quarterly decrease and a 20 percent decrease versus the same quarter a year ago. DARTs for the full year were 197,000 as compared to 188,000 in 2008.
At quarter end, E*TRADE reported 4.5 million customer accounts, which included 2.7 million brokerage accounts. Brokerage accounts decreased by 17,000 in the quarter, including a reduction of 8,000 accounts as a result of the sale of the Company’s local trading business in Germany. For the full year, the Company added 115,000 net new brokerage accounts.
During the quarter, customer security holdings increased five percent, or $4.5 billion, and brokerage-related cash increased by $0.6 billion to $20.9 billion. Net new customer assets were negative $0.3 billion and were impacted by the restructuring of the Company’s international operations and a $1.3 billion decline in savings and other bank-related customer deposits, as the Company continued to execute its balance sheet reduction strategy. Customers were net buyers of approximately $800 million of securities. Margin receivables increased from $3.4 billion to $3.8 billion.
U.S. net new brokerage assets were positive $1.5 billion during the quarter, reflecting the Company’s strategic focus on growing the online brokerage business. For the full year, U.S. net new brokerage assets were positive $7.2 billion.
Commissions, fees and service charges, principal transactions, and other revenue in the fourth quarter were $205 million, compared with $231 million in the third quarter. This reflected the sequential decline in trading activity and a $0.19 decline in the average commission per trade due to customer mix.
Net interest income was essentially flat at $321 million, as a $459 million decline in average interest-earning assets to $43.8 billion was largely offset by a four basis point expansion in the net interest income spread.
Total operating expense increased by $17 million to $318 million from the prior quarter, primarily due to charges associated with the restructuring of the Company’s international operations, seasonal advertising, and higher real estate owned (REO) expenses.
The Company continued to make progress during the fourth quarter in reducing balance sheet risk as its loan portfolio contracted by $1.1 billion from last quarter, of which $0.8 billion was due to prepayments or scheduled principal reductions.
Fourth quarter provision for loan losses decreased $55 million from the prior quarter to $292 million. Total net charge-offs in the quarter were $324 million, a decrease of $27 million from the prior quarter. Total allowance for loan losses was virtually flat at approximately $1.2 billion, or six percent of gross loans receivable. For the Company’s entire loan portfolio, total special mention delinquencies (30-89 days) declined by three percent and total at-risk delinquencies (30-179 days) declined by two percent in the quarter.
The Company continues to maintain Bank capital ratios substantially in excess of regulatory well-capitalized thresholds. As of December 31, 2009, the Company reported Bank Tier 1 capital ratios of 6.69 percent to total adjusted assets and 12.79 percent to risk-weighted assets. The Bank had excess risk-based total capital (i.e., above the level regulators define as well-capitalized) of $899 million at year end.
Historical monthly metrics from January 2006 to December 2009 can be found on the E*TRADE FINANCIAL Investor Relations website at https://investor.etrade.com.
The Company will host a conference call to discuss the results beginning at 5:00 p.m. EST today. This conference call will be available to domestic participants by dialing 800-683-1525 and 973-872-3197 for international participants. The conference ID number is 49070218. A live audio webcast and replay of this conference call will also be available at https://investor.etrade.com.
About E*TRADE FINANCIAL
The E*TRADE FINANCIAL family of companies provides financial services including online brokerage and related banking products and services to retail investors. Specific business segments include Trading and Investing, and Balance Sheet Management. Securities products and services are offered by E*TRADE Securities LLC (Member FINRA/SIPC). Bank products and services are offered by E*TRADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries.
Important Notices
E*TRADE FINANCIAL, E*TRADE and the E*TRADE logo are trademarks or registered trademarks of E*TRADE FINANCIAL Corporation.
Forward-Looking Statements
The statements contained in this news release that are forward looking are based on current expectations that are subject to a number of uncertainties and risks, and actual results may differ materially. Such statements include those relating to the ability of the Company to achieve sustainable, profitable growth. The uncertainties and risks include, but are not limited to, potential changes in market activity, anticipated changes in the rate of new customer acquisition, macro trends of the economy in general and the residential real estate market, instability in the consumer credit markets and credit trends, increased mortgage loan delinquency and default rates, portfolio growth, portfolio seasoning and resolution through collections, sales or charge-offs and the potential negative regulatory consequences resulting from actions by the Office of Thrift Supervision or other regulators. Further information about these risks and uncertainties can be found in the Risk Factor section of the Company’s prospectus supplement dated September 23, 2009 and in the information included or incorporated in the annual, quarterly and current reports on Form 10-K, Form 10-Q, and Form 8-K previously filed by E*TRADE FINANCIAL Corporation with the SEC (including information in these reports under the caption “Risk Factors”). Any forward-looking statement included in this release speaks only as of the date of this communication; the Company disclaims any obligation to update any information.
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