E-Trade posts wider-than-expected 4th-quarter loss

E-Trade posts wider-than-expected 4Q loss of $186M as low trading volume, charge hurt results

Associated Press

NEW YORK (AP) -- E-Trade Financial Corp. on Thursday reported a wider-than-expected fourth-quarter loss as low trading volume and a one-time charge to retire debt cut into the online brokerage's results. Shares of E-Trade fell in after-hours trading.

E-Trade reported a net loss of nearly $186.1 million, or 65 cents per share, for the three months ended Dec. 31. That compared with a loss of $6.3 million, or 2 cents per share, in the same quarter a year earlier.

The latest quarter's result included a pretax charge of $257 million on early extinguishment of debt as a result of the company's refinancing of $1.3 billion in debt.

Analysts surveyed by FactSet, on average, expected an adjusted loss of 54 cents per share.

Revenue slipped nearly 2 percent to $467.7 million, but topped analysts' consensus forecast for $457 million.

The New York-based company reported results after its shares slipped 3 cents to close at $10.27. The stock fell further in after-hours trading, down 42 cents, or 4.1 percent, to $9.85. The stock has traded in a 52-week range of $7.08 to $11.50.

Stock market trading volume was light during much of the fourth quarter as investors worried about the so-called "fiscal cliff" negotiations between Congress and the White House, as well as the November elections.

E-Trade's 128,000 daily average revenue trades in the fourth quarter were down 9 percent from a year ago. Commissions, fees and service charges, and principal transactions fell to $151 million from $156 million in last year's fourth quarter. While trading volume was down, the average commission per trade rose to $11.10 from $10.80 a year ago.

Chief Financial Officer Matthew Audette said the company's brokerage business remained "resilient" in 2012 despite being characterized by what he called "a retrenchment of the retail investor."

The decline in stock trading volume also hurt recent results at larger rival TD Ameritrade, whose quarterly earnings slipped 3 percent as trading slowed.

Low interest rates also are hurting brokerages, cutting into their interest income. E-Trade's net operating interest income was $260.2 million in the latest quarter, down 10 percent from the year-ago quarter.

However, E-Trade partly offset that decline by reducing operating expenses, which fell 6 percent to $285.4 million.

E-Trade added 10,000 net new brokerage accounts during the latest quarter, the same total that it reported in the year-ago quarter. The company had 4.5 million customer accounts at year end, including 2.9 million brokerage accounts. E-Trade ended the year with $201 billion in total customer assets, up from $172 billion at the end of 2011.

E-Trade reported fourth-quarter results a week after naming banking industry veteran Paul Idzik as its new CEO. Idzik began in the post on Tuesday, taking over for interim CEO Frank Petrilli. Petrilli took over in August after the abrupt ouster of former CEO Steven Freiberg.

Idzik most recently served as group chief executive of DTZ Holdings PLC in London, the parent company of a group of real estate consultancies. Before that, he spent 10 years at English megabank Barclays PLC.

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