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E*TRADE Financial Corp. CEO Discusses Q3 2010 Earnings Call Transcript

E*TRADE Financial Corp. CEO Discusses Q3 2010 Earnings Call Transcript

E*TRADE Financial Corp (



Q3 2010 Earnings Call

October 20, 2010 5:00 p.m. ET


Susan Hickey – Media Relations

Steven Freiberg – CEO

Bruce Nolop – EVP & CFO

Paul Brandow – EVP & Chief Risk Officer

Partick O’Shawna – Raymond James


Daniel Harris – Goldman Sachs

Rich Repetto – Sandler O’Neill

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Eric Burchton – Barclays Capital

Howard Chen – Credit Suisse

Michael Carrier – Deutsche Bank

Mike Vinciquerra – BMO Capital Markets

Matt Snowing – FBR Capital Markets

Faye Elliott – Banc of America/Merrill Lynch

Michael Curcio – EVP & President, E*TRADE Securities



Welcome to the E*TRADE Financial Third Quarter 2010 Earnings Conference Call (Operator Instructions)

Thank you. It is now my pleasure to turn the floor over to Susan Hickey, from E*TRADE Financial. Please go ahead.

Susan Hickey

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Previous Statements by ETFC
» E*TRADE Financial Corp. Q2 2010 Earnings Call Transcript
» E*TRADE Financial Corp. Q1 2010 Earnings Call Transcript
» E*TRADE Financial Corp. Q4 2009 Earnings Call Transcript

Thank you. Good afternoon and thank you for joining us for E*TRADE Financial’s Third Quarter 2010 Conference Call. Joining me today are Steven Freiburg, E*TRADE’s Chief Executive Officer, Bruce Nolop, our Chief Financial Officer, and other members of E*TRADE’s management team.

Before turning the call over to Steve, I’d like to remind everyone that during this conference call, the company will be sharing with you certain projections for other forward-looking statements regarding future events or its future performance.

E*TRADE Financial cautions you that certain factors including risks and uncertainties referred to in the 10K’s, 10Q’s, and other documents E*TRADE files with the Securities and Exchange Commission could cause the company’s actual results to defer materially from what is indicated on its highest projects for forward-looking statements.

This call will present information as of October 20


, 2010. Please note that E*TRADE FINANCIAL dispoints any duty to update any forward-looking statements made in the presentation.

During this call, E*TRADE Financial now may also discuss the non-GAAP financial measures, and talk about its performance. These measures will be reconciled to GAAP either during the course of this call, or in the company’s press release, which can be found on its website at

This call is being recorded. Replay of this call will be available via phone, webcast, and podcast beginning this evening at approximately 7:00 p.m. The call is being webcast live at No other recordings or copies of this call are authorized, or may be relied upon.

And with that, I will now turn the call over to Steve Freiburg.

Steven Freiburg

Thank you everyone for joining us today.

To begin this afternoon’s call, I will cover highlights from the third quarter, and then Bruce will take you through the results. From there, I’ll share some thoughts on the opportunities we see for the business after which we will be happy to take your questions.

The third quarter was an important one for E*TRADE as we delivered our second consecutive quarterly profit. We reported pre-tax income of 36 million, and achieved positive net income for the quarter despite an unusually reported tax rate.

Strength in a number of areas supported our performance in a quarter that was notable for the industry-wide decline in trading activity, and a challenging interest rate environment.

We were pleased with the growth in net new assets, and average margin receivables, and with the quality of new accounts in the brokerage business.

Improvement in loan performance trends drove the eighth consecutive quarterly decline in our loan-loss provision. Effective balance sheet strategies resulted in solid net interest income, and we benefited from opportunistic gains in our securities portfolio.

Our results demonstrated progress in positioning the company for sustainable profitability in growth as we continue to execute on a number of key objectives.

Our provision for loan losses has been below charge-offs for five consecutive quarters. We have generated organic-bank regulatory capital each quarter this year. And we have delivered our second consecutive profitable quarter.

During the quarter, we executed on a number of initiatives to expand our offering to both active traders and long-term investors.

In June, we released application programming interface for API, allowing third-party vendors and independent software developers to interface seamlessly with our investing platform.

In September, we introduced new research and trade idea generation tools, including market commentary from Dreyfus and Buzz and Banta from Minyanville; a leading business and finance site.

Also in September, we launched a new cross- media ad campaign including TV spots that are running during highly-rated fall sporting events and primetime programming.

The campaign with the tagline, Investing Unleased, includes several new E*TRADE baby spots as well as product ads that speak directly to self-directed investors who are ready to take control of their finances. It is a high-impact campaign that moves the brand forward and positions us well for the fourth quarter as well as 2011.

In addition, our ongoing investment in the overall customer experience including a growing relationship management team and simplified pricing continues to pay off. This supported a sequential improvement in our annualized brokerage account attrition rate from 13% to 10%; our lowest attrition rate in more than six years, and a level we will strive to sustain over the long run.

We also received industry recognition for our Corporate Services Organization from Group Five, the leader in equity compensation research, which named us number one in overall satisfaction and loyalty for stock plan administration in its tenth-annual benchmarking survey.

Our Corporate Services Group, which provides stock plan administrative tools and services continues to gain traction, and now counts 20% of the S&P 500 as clients. This continues to be an attractive opportunity for us both as a standalone business, and as a meaningful source of new retail brokerage accounts.

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