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E*TRADE (ETFC) Up on Q2 Earnings Beat, Revenues Rise
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Shares of E*TRADE Financial Corporation’s gained nearly 3% in the after-market trading following the release of its second-quarter 2016 results. Earnings came in at 48 cents per share, comfortably beating the Zacks Consensus Estimate of 39 cents. The reported figure also compared favorably with the prior-year quarter adjusted earnings of 25 cents.
Results were aided by increased revenues, reduced expenses and a benefit from provisions. Further, the quarter witnessed an increase in daily average revenue trades (DARTs) along with growth in customer accounts.
Paul Thomas Idzik, Chief Executive Officer & Director stated, “Trading activity declined throughout the period, but experienced a spike surrounding the courageous UK vote to leave the European Union, when our customers took advantage of the dip in the equity markets to the tune of $1.1 billion in net buying during a single trading day, the highest on record.”
Net income for the quarter was $133 million, up from $72 million in the prior-year quarter. Net income for the prior-year quarter excludes $220 million income tax benefit related to settled IRS examination.
Net revenue for the second quarter of 2016 came in at $474 million, increasing 10% year over year. However, revenues came slightly below the Zacks Consensus Estimate of $475 million.
Net interest income increased 13% on a year-over-year basis to $286 million, primarily due to reduced expenses, partially offset by lower interest income. Net interest margin was 2.64%, up from 2.37% in the year-ago quarter.
Non-interest income was of $188 million, up 6% year over year. The increase largely reflected higher commissions as well as fees and service charges.
Total non-interest expense declined 5% year over year to $295 million, mainly due to lower FDIC insurance premiums, advertising and market development costs and professional services expense.
Trading Activity
Total DARTs increased 2% year over year to 152,488 in the reported quarter.
At the end of the reported quarter, E*TRADE had 5.1 million customer accounts (including 3.3 million brokerage accounts), up 4% from the year-ago quarter.
However, the company’s total customer assets were $285.9 billion, down 5% year over year. Brokerage-related cash increased 2% year over year to $43.0 billion
Notably, customers were net buyers of about $1.4 billion of securities compared with $1.2 billion in the prior-year quarter. Net new brokerage assets totaled $1.6 billion, down from $2.9 billion in the prior-year quarter.
Improved Credit Quality
E*TRADE recorded net recoveries of $6 million in the quarter compared with charge-offs of $3 million in the year-ago quarter. Further, benefit to provision for loan losses was $35 million compared with provisions of $3 million in the year-ago quarter.
Allowance for loan losses declined 27% year over year to $293 million.
Additionally, total special delinquencies (30 to 89 days delinquent) declined 23% year over year to $120 million in E*TRADE’s entire loan portfolio. Notably, total delinquent loans declined 26% year over year to $335 million
Balance Sheet and Capital Ratios
E*TRADE continued to lower its balance-sheet risk. The company’s loan portfolio totaled $4.1 million at the end of the reported quarter, down 22% year over year.
As of Jun 30, 2016, E*TRADE had total assets of $49.2 billion compared with $45.4 billion as of Jun 30, 2015.
The company’s capital ratios remained strong. Under the Basel III Standardized Approach that was brought into effect in Jan 2015, E*TRADE reported Common Equity Tier 1 ratio of 35.6% compared with 37.7% in the year-ago quarter. Total risk-based capital ratio was 41.2% down from 42.3% in the prior-year quarter. Tier 1 leverage ratio was 7.5% compared with 8.5% in the prior-year quarter.
Share Repurchase
During the reported quarter, the company repurchased 5.9 million shares for $151 million at an average price of $25.64.
Our Viewpoint
Results of E*TRADE show a decent performance, reflecting benefit from the Brexit vote. We expect the company's focus on core operations to lead to an improved profitability, going forward. Notably, the company intends to cross $50 billion assets by the first half of next year. Additionally, E*TRADE’s continued share buyback instills investors’ confidence in the stock. However, we remain cautious, given the competitive pressure and macro headwinds.
TD Ameritrade Holding Corporation’s (AMTD - Free Report) fiscal 2016 third-quarter adjusted earnings per share of 39 cents beat the Zacks Consensus Estimate by a penny. Results benefited from higher revenues. Notably the company recorded growth in average client trades per day, as well as net new client assets.
The Charles Schwab Corp.’s (SCHW - Free Report) second-quarter 2016 earnings of 30 cents per share were in line with the Zacks Consensus Estimate. Revenue growth, primarily driven by increase in equity market volatility, lower level of fee waivers and stable provisions acted as tailwinds. Further, there was a significant increase in total client assets and new brokerage accounts.
Interactive Brokers Group, Inc.’s (IBKR - Free Report) second-quarter adjusted earnings per share of 40 cents beat the Zacks Consensus Estimate by 14.3%. The bottom-line beat was primarily driven by significant growth in net interest income, increased DARTs and an improved performance at the Electronic Brokerage segment.
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E*TRADE (ETFC) Up on Q2 Earnings Beat, Revenues Rise
Shares of E*TRADE Financial Corporation’s gained nearly 3% in the after-market trading following the release of its second-quarter 2016 results. Earnings came in at 48 cents per share, comfortably beating the Zacks Consensus Estimate of 39 cents. The reported figure also compared favorably with the prior-year quarter adjusted earnings of 25 cents.
Results were aided by increased revenues, reduced expenses and a benefit from provisions. Further, the quarter witnessed an increase in daily average revenue trades (DARTs) along with growth in customer accounts.
Paul Thomas Idzik, Chief Executive Officer & Director stated, “Trading activity declined throughout the period, but experienced a spike surrounding the courageous UK vote to leave the European Union, when our customers took advantage of the dip in the equity markets to the tune of $1.1 billion in net buying during a single trading day, the highest on record.”
Net income for the quarter was $133 million, up from $72 million in the prior-year quarter. Net income for the prior-year quarter excludes $220 million income tax benefit related to settled IRS examination.
Revenues Rise, Expenses Down
Net revenue for the second quarter of 2016 came in at $474 million, increasing 10% year over year. However, revenues came slightly below the Zacks Consensus Estimate of $475 million.
Net interest income increased 13% on a year-over-year basis to $286 million, primarily due to reduced expenses, partially offset by lower interest income. Net interest margin was 2.64%, up from 2.37% in the year-ago quarter.
Non-interest income was of $188 million, up 6% year over year. The increase largely reflected higher commissions as well as fees and service charges.
Total non-interest expense declined 5% year over year to $295 million, mainly due to lower FDIC insurance premiums, advertising and market development costs and professional services expense.
Trading Activity
Total DARTs increased 2% year over year to 152,488 in the reported quarter.
At the end of the reported quarter, E*TRADE had 5.1 million customer accounts (including 3.3 million brokerage accounts), up 4% from the year-ago quarter.
However, the company’s total customer assets were $285.9 billion, down 5% year over year. Brokerage-related cash increased 2% year over year to $43.0 billion
Notably, customers were net buyers of about $1.4 billion of securities compared with $1.2 billion in the prior-year quarter. Net new brokerage assets totaled $1.6 billion, down from $2.9 billion in the prior-year quarter.
Improved Credit Quality
E*TRADE recorded net recoveries of $6 million in the quarter compared with charge-offs of $3 million in the year-ago quarter. Further, benefit to provision for loan losses was $35 million compared with provisions of $3 million in the year-ago quarter.
Allowance for loan losses declined 27% year over year to $293 million.
Additionally, total special delinquencies (30 to 89 days delinquent) declined 23% year over year to $120 million in E*TRADE’s entire loan portfolio. Notably, total delinquent loans declined 26% year over year to $335 million
Balance Sheet and Capital Ratios
E*TRADE continued to lower its balance-sheet risk. The company’s loan portfolio totaled $4.1 million at the end of the reported quarter, down 22% year over year.
As of Jun 30, 2016, E*TRADE had total assets of $49.2 billion compared with $45.4 billion as of Jun 30, 2015.
The company’s capital ratios remained strong. Under the Basel III Standardized Approach that was brought into effect in Jan 2015, E*TRADE reported Common Equity Tier 1 ratio of 35.6% compared with 37.7% in the year-ago quarter. Total risk-based capital ratio was 41.2% down from 42.3% in the prior-year quarter. Tier 1 leverage ratio was 7.5% compared with 8.5% in the prior-year quarter.
Share Repurchase
During the reported quarter, the company repurchased 5.9 million shares for $151 million at an average price of $25.64.
Our Viewpoint
Results of E*TRADE show a decent performance, reflecting benefit from the Brexit vote. We expect the company's focus on core operations to lead to an improved profitability, going forward. Notably, the company intends to cross $50 billion assets by the first half of next year. Additionally, E*TRADE’s continued share buyback instills investors’ confidence in the stock. However, we remain cautious, given the competitive pressure and macro headwinds.
E TRADE FINL CP Price, Consensus and EPS Surprise
E TRADE FINL CP Price, Consensus and EPS Surprise | E TRADE FINL CP Quote
E*TRADE currently carries a Zacks Rank #3 (Hold).
Performance of Other Investment Brokers
TD Ameritrade Holding Corporation’s (AMTD - Free Report) fiscal 2016 third-quarter adjusted earnings per share of 39 cents beat the Zacks Consensus Estimate by a penny. Results benefited from higher revenues. Notably the company recorded growth in average client trades per day, as well as net new client assets.
The Charles Schwab Corp.’s (SCHW - Free Report) second-quarter 2016 earnings of 30 cents per share were in line with the Zacks Consensus Estimate. Revenue growth, primarily driven by increase in equity market volatility, lower level of fee waivers and stable provisions acted as tailwinds. Further, there was a significant increase in total client assets and new brokerage accounts.
Interactive Brokers Group, Inc.’s (IBKR - Free Report) second-quarter adjusted earnings per share of 40 cents beat the Zacks Consensus Estimate by 14.3%. The bottom-line beat was primarily driven by significant growth in net interest income, increased DARTs and an improved performance at the Electronic Brokerage segment.
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