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E*TRADE Financial delivered a positive earnings surprise of 20.5% in third-quarter 2018. Earnings of $1.00 per share comfortably surpassed the Zacks Consensus Estimate of 83 cents. Moreover, the results, including certain one-time items, compared favorably with 49 cents recorded in the prior-year quarter.
The results reflected improved net revenues, controlled expenses and a benefit to provision for loan losses. Daily average revenue trades (DARTs) increased on a year-over-year basis. Further, the quarter registered a rise in customer accounts and reduced delinquencies.
E*TRADE’s net income available to common shareholders for the quarter came in at $261 million compared with $135 million recorded in the prior-year quarter.
Revenues Improve, Expenses Down
Net revenues in the reported quarter came in at $720 million, comfortably surpassing the Zacks Consensus Estimate of $715.2 million. Revenues were up 20.2% from the year-ago quarter.
Net interest income climbed 19.2% on a year-over-year basis to $466 million, primarily due to higher interest income, partially offset by elevated interest expenses. Net interest margin was 3.10%, up 25 basis points from 2.85% reported in the prior-year quarter.
Non-interest income of $254 million increased 22.1% from the year-ago quarter. The reported quarter recorded higher commissions, elevated fees and service charges, along with other income.
Total non-interest expenses declined 6.2% year over year to $380 million. The decrease resulted mainly from reduced losses on early extinguishment of debt, partly offset by higher compensation and benefits expenses.
Improved Trading Performance
Total DARTs increased 29% year over year to 266,290 in the third quarter, including 32% in derivatives. At the end of the quarter, E*TRADE had 6 million customer accounts (including 3.9 million brokerage accounts), up 11% from the year-ago quarter.
Further, the company’s total customer assets were $472.8 billion, up 29% year over year. Brokerage-related cash increased 2% year over year to $53.3 billion.
Notably, customers were net buyers of about $2.2 billion of securities compared with $1.3 billion in the prior-year quarter. Net new brokerage assets totaled $3.2 billion, up 45% from the year-earlier quarter.
Credit Quality Marks Significant Improvement
E*TRADE’s overall credit quality depicted an improvement. Net recoveries were $21 million in the July-Sep quarter compared with $7 million recorded in the prior-year quarter. Also, the company recorded a provision benefit of $34 million compared with $29 million reported in the comparable period last year.
Allowance for loan losses plummeted 56.4% year over year to $41 million. Additionally, total special delinquencies (30-89 days delinquent) dropped 25.5% year over year to $76 million in E*TRADE’s entire loan portfolio. Notably, total delinquent loans dipped 30.2% year over year to $187 million.
Balance Sheet and Capital Ratios
E*TRADE’s loan portfolio totaled $2.3 billion at the end of the reported quarter, down from $2.7 billion as of Dec 31, 2017.
As of Sep 30, 2018, E*TRADE had total assets of $64.7 billion compared with $63.4 billion as of Dec 31, 2017.
The company’s capital ratios remained strong. As of Sep 30, 2018, E*TRADE reported Tier 1 risk-based capital ratio of 40.5% compared with 37.8% in the year-ago quarter. Total risk-based capital ratio was 40.9%, down from 42.4% in the prior-year quarter. Tier 1 leverage ratio was 7.1% compared with 7.2% in the year-ago quarter.
During the third quarter, the company repurchased 5.3 million shares at an average price of $51.38. Notably, it completed its share repurchase authorization of $1 billion.
Our Viewpoint
E*TRADE’s trading performance and credit quality have displayed continued improvement. Though we remain cautious about the competitive pressure and macro headwinds, we anticipate the company’s focus on core operations, controlled expenses and strategic initiatives to result in improved profitability.
E*TRADE Financial Corporation Price, Consensus and EPS Surprise
Charles Schwab’s (SCHW - Free Report) third-quarter 2018 earnings of 65 cents per share beat the Zacks Consensus Estimate by a penny. Also, earnings surged 55% from the prior-year quarter. Revenue growth (driven by a rise in interest income and trading revenues) and the absence of fee waivers drove the results. Further, the quarter registered an impressive rise in total client assets and new brokerage accounts. However, higher expenses remain a concern.
Interactive Brokers Group, Inc. (IBKR - Free Report) released third-quarter 2018 results. Earnings per share of 51 cents surpassed the Zacks Consensus Estimate of 49 cents. Also, the figure was higher than the prior-year earnings of 43 cents per share. The results benefited from an improvement in revenues and a rise in DARTs. Further, the Electronic Brokerage segment continued to perform decently. However, higher expenses were a headwind.
Among others, TD Ameritrade Holding Corporation (AMTD - Free Report) is scheduled to report quarterly results on Oct 22.
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And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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E*TRADE (ETFC) Q3 Earnings Impress, Trading Metrics Improve
E*TRADE Financial delivered a positive earnings surprise of 20.5% in third-quarter 2018. Earnings of $1.00 per share comfortably surpassed the Zacks Consensus Estimate of 83 cents. Moreover, the results, including certain one-time items, compared favorably with 49 cents recorded in the prior-year quarter.
The results reflected improved net revenues, controlled expenses and a benefit to provision for loan losses. Daily average revenue trades (DARTs) increased on a year-over-year basis. Further, the quarter registered a rise in customer accounts and reduced delinquencies.
E*TRADE’s net income available to common shareholders for the quarter came in at $261 million compared with $135 million recorded in the prior-year quarter.
Revenues Improve, Expenses Down
Net revenues in the reported quarter came in at $720 million, comfortably surpassing the Zacks Consensus Estimate of $715.2 million. Revenues were up 20.2% from the year-ago quarter.
Net interest income climbed 19.2% on a year-over-year basis to $466 million, primarily due to higher interest income, partially offset by elevated interest expenses. Net interest margin was 3.10%, up 25 basis points from 2.85% reported in the prior-year quarter.
Non-interest income of $254 million increased 22.1% from the year-ago quarter. The reported quarter recorded higher commissions, elevated fees and service charges, along with other income.
Total non-interest expenses declined 6.2% year over year to $380 million. The decrease resulted mainly from reduced losses on early extinguishment of debt, partly offset by higher compensation and benefits expenses.
Improved Trading Performance
Total DARTs increased 29% year over year to 266,290 in the third quarter, including 32% in derivatives. At the end of the quarter, E*TRADE had 6 million customer accounts (including 3.9 million brokerage accounts), up 11% from the year-ago quarter.
Further, the company’s total customer assets were $472.8 billion, up 29% year over year. Brokerage-related cash increased 2% year over year to $53.3 billion.
Notably, customers were net buyers of about $2.2 billion of securities compared with $1.3 billion in the prior-year quarter. Net new brokerage assets totaled $3.2 billion, up 45% from the year-earlier quarter.
Credit Quality Marks Significant Improvement
E*TRADE’s overall credit quality depicted an improvement. Net recoveries were $21 million in the July-Sep quarter compared with $7 million recorded in the prior-year quarter. Also, the company recorded a provision benefit of $34 million compared with $29 million reported in the comparable period last year.
Allowance for loan losses plummeted 56.4% year over year to $41 million. Additionally, total special delinquencies (30-89 days delinquent) dropped 25.5% year over year to $76 million in E*TRADE’s entire loan portfolio. Notably, total delinquent loans dipped 30.2% year over year to $187 million.
Balance Sheet and Capital Ratios
E*TRADE’s loan portfolio totaled $2.3 billion at the end of the reported quarter, down from $2.7 billion as of Dec 31, 2017.
As of Sep 30, 2018, E*TRADE had total assets of $64.7 billion compared with $63.4 billion as of Dec 31, 2017.
The company’s capital ratios remained strong. As of Sep 30, 2018, E*TRADE reported Tier 1 risk-based capital ratio of 40.5% compared with 37.8% in the year-ago quarter. Total risk-based capital ratio was 40.9%, down from 42.4% in the prior-year quarter. Tier 1 leverage ratio was 7.1% compared with 7.2% in the year-ago quarter.
During the third quarter, the company repurchased 5.3 million shares at an average price of $51.38. Notably, it completed its share repurchase authorization of $1 billion.
Our Viewpoint
E*TRADE’s trading performance and credit quality have displayed continued improvement. Though we remain cautious about the competitive pressure and macro headwinds, we anticipate the company’s focus on core operations, controlled expenses and strategic initiatives to result in improved profitability.
E*TRADE Financial Corporation Price, Consensus and EPS Surprise
E*TRADE Financial Corporation Price, Consensus and EPS Surprise | E*TRADE Financial Corporation Quote
E*TRADE currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Investment Brokers
Charles Schwab’s (SCHW - Free Report) third-quarter 2018 earnings of 65 cents per share beat the Zacks Consensus Estimate by a penny. Also, earnings surged 55% from the prior-year quarter. Revenue growth (driven by a rise in interest income and trading revenues) and the absence of fee waivers drove the results. Further, the quarter registered an impressive rise in total client assets and new brokerage accounts. However, higher expenses remain a concern.
Interactive Brokers Group, Inc. (IBKR - Free Report) released third-quarter 2018 results. Earnings per share of 51 cents surpassed the Zacks Consensus Estimate of 49 cents. Also, the figure was higher than the prior-year earnings of 43 cents per share. The results benefited from an improvement in revenues and a rise in DARTs. Further, the Electronic Brokerage segment continued to perform decently. However, higher expenses were a headwind.
Among others, TD Ameritrade Holding Corporation (AMTD - Free Report) is scheduled to report quarterly results on Oct 22.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>