E-Trade returns to profit in 3Q, but revenue falls

Lower provision for loan losses, expenses help return E-Trade to profit in 3Q

Associated Press

NEW YORK (AP) -- E-Trade Financial returned to a profit in the third quarter, as a sharp drop in revenue was offset by lower expenses and the online broker set aside less money to cover potential loan losses.

The New York company also said it agreed to sell its market-making business, G1 Execution Services, to an affiliate of investment firm Susquehanna International Group LLP for $75 million. The deal is expected to close in three to six months.

As part of the deal, E-Trade plans to route 70 percent of its customer equity order flow to G1 Execution Services over the next five years.

Shares of E-Trade fell 3 percent in after-hours trading to $16.80.

E-Trade's daily average revenue trades in the quarter jumped 13 percent from a year earlier to 145,000.

At the same time, the company's noninterest income fell to $176 million from $229.2 million.

That contributed to total revenue sliding 15 percent to $417 million from $490 million.

Still, operating expenses improved to $270.7 million from $289 million. And the company's provision for loan losses declined to $37.4 million from $141 million a year earlier.

For the three months ended Sept. 30, E-Trade reported net income of $47 million, or 16 cents per share. That compares with a loss of $29 million, or 10 cents per share, a year earlier.

Last year's quarter included $50 million in charge-offs related to the untimely reporting of borrower bankruptcies.

Analysts polled by FactSet had anticipated, on average, adjusted earnings of 16 cents per share on $419.9 million in revenue.

Shares ended regular trading down 10 cents at $17.34. The stock fell another 52 cents, or 3 percent, to $16.82 in extended trading.

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