E-Trade meets expectations

Pure-play online bank and brokerage E-Trade Group Inc. reported first-quarter numbers Tuesday afternoon that were in line with estimates. The company had revenue of US$330 million, and its net income from continued operations was $868,000 (break even per share). The net income is compared to a net loss from operations of $672,000 (break even per share) for the same quarter last year. Revenue was down 21 percent compared to the same quarter last year and down 1.2 percent from the December quarter.

This marks the company's fifth straight quarter with break-even or better operating results. That's something that few original Internet pure-plays can claim at this point.

After write-downs and merger-related charges, E-Trade recorded a net loss of $7.2 million, or 2 cents per share, compared with a net loss of 9 cents in the same quarter last year.

E-Trade surged 21.2 percent Tuesday to $7.55. In after-hours activity, it has traded in a range from the closing price to as low as $7.30.

It was an up and down quarter for E-Trade. Total customer assets fell to $47.9 billion from $52.6 billion in the year-end quarter. However, banking assets rose 7 percent to $12.1 billion from $11.1 billion.

Daily average transactions fell 9 percent to 136,000 from 150,000. The company ruffled a few feathers when it announced it would charge $15 per quarter on smaller, less-active brokerage accounts. Regardless, the company managed to see a 5 percent quarter-over-quarter rise in total accounts, from 3,559,009 to 3,725,121. Bank accounts rose 12 percent, but brokerage accounts saw only a 4 percent increase.

Also during the quarter, the company jumped from trading on the Nasdaq to a supposedly more comfortable home with financial stalwarts on the New York Stock Exchange. However, the stock has dropped 40.5 percent since transferring to the NYSE on Feb. 15. Ameritrade, which still trades on the Nasdaq, is down 44 percent in the same time period. Leading online and retail brokerage Charles Schwab & Co., on the NYSE, is down 33 percent during the same period. Both Schwab and Ameritrade Inc. announced layoffs and cost-cutting initiatives during the quarter.

E-Trade closed its acquisition of LoansDirect this quarter. And just days after closing the quarter, E-Trade opened its flagship storefront in Manhattan. It also recently announced that it would add 20 new E-Trade Zones for Super Target stores during the next 12 months.

"In many ways, the current economic environment has been the ultimate test of our business model," CEO Christos Cotsakos said in a statement. "If our business model can deliver operating profits during a full market cycle, we expect it to perform to its ultimate potential during stronger market, economic and business conditions."

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