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Record Revenues Drive Jump in E-Trade

Posted by inet - 2005-10-20

NEW YORK - Profits at online financial services company E-Trade Financial Corp. climbed more than 35 percent in the third quarter as customer transactions rose along with the stock market and the company expanded its banking and loan businesses.
For the quarter ended Sept. 30, E-Trade earned $107.5 million, or 28 cents per share, compared to $79.3 million, or 21 cents per share, in the third quarter of 2004, the company said Wednesday. Revenues were a record $422.8 million, up 26 percent from $335.1 million in the year-ago quarter.

Analysts surveyed by Thomson Financial forecast earnings of 27 cents per share on revenues of $406.7 million.

Shares of E-Trade rose 55 cents, or 3.3 percent, to $17.05 on the  New York Stock Exchange, then added 10 cents to $17.15 in after-hours electronic trading.

"We're doing a great job with the core retail customer, servicing them with cash products, credit products and investment products," Jarrett Lilien, president and chief operating officer of E-Trade, said in an interview. "It's working as it's written on the wall."

The number of active E-Trade accounts increased by 48,728 in the third quarter, up 86 percent from 26,180 net new accounts in the second quarter. Assets per customer rose 9 percent to $36,276 from the second quarter. The company also holds a record 19.5 percent of customer assets in cash — a reflection of customers' comfort in using E-Trade for banking and cash transitions.

Lilien added that mortgage and loan origination rose sharply for the quarter. Net loans receivable rose to $17 million in the quarter, up from $10.3 million a year ago.

E-Trade also increased its full-year 2005 profit forecasts to a range of $1.04 to $1.09 per share, up from earlier estimates of 96 cents to $1.06. Analysts are expecting full-year earnings of $1.05 per share.

Lilien said the company's $700 million acquisition of Harrisdirect from BMO Financial Group closed on Oct. 6, a quarter ahead of schedule, and that the majority of Harrisdirect customers have stayed with E-Trade.

"The thing you most fear in an acquisition is customer attrition," Lilien said. "We haven't seen that yet."

E-Trade is also in the middle of acquiring BrownCo, an online trading arm of JPMorgan Chase & Co. The company said last month it would pay $1.6 billion for BrownCo and its 200,000 customers, whose account balances are the second-highest in the online trading sector.

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