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ETrade 4th-Quarter Net Income Jumps

Brokerages: Cost cutting and a push into businesses other than trading help lift profit.

January 15, 2002|From Times Wire Services

Online brokerage ETrade Group Inc. posted a sharp increase in fourth-quarter earnings Monday, helped largely by cost cuts and gains from businesses other than stock trading.

But the Menlo Park, Calif.-based company also said its trading volumes rose compared with the third quarter as share prices rebounded, suggesting that the long decline in discount brokers' commission revenues may have reached at least a temporary bottom. The company gave an upbeat forecast for 2002 results overall.

ETrade said fourth-quarter net income was $21.6 million, or 6 cents a share, up from $1.4 million, or break-even per share, a year earlier. But the latest quarter's results included a one-time gain from the early payoff of debt. Excluding that gain, ETrade said earnings were $7.7 million, or 2 cents a diluted share.

Revenue rose 3.3% to $345 million from $334 million a year earlier.

The company's push into banking, mortgage services, insurance and other non-brokerage lines has helped offset still-weak results in stock trading, analysts said.

"I think the profit driver has been the diversification model," ETrade President Jerry Gramaglia said.

Even so, ETrade said it processed an average of 110,000 securities trades a day in the fourth quarter, up 21% from the third-quarter total, though down from 150,000 trades a day in the fourth quarter of 2000. Brokerage commission revenue totaled $90.7 million in the latest quarter, up from $71 million in the third quarter.

As investors' interest in the market has waned, ETrade slashed its marketing outlays. Total marketing costs in the fourth quarter were $54 million, down from $97 million a year earlier.

Helped by diversification, ETrade said it expects earnings of 45 to 55 cents a share in 2002, excluding goodwill charges and other one-time items. Wall Street had been expecting about 38 cents a share.

The company's stock fell 11 cents to $12.20 on the New York Stock Exchange in regular trading, then rose to $12.67 in after-hours activity, following the earnings report.


Reuters and Bloomberg News were used in compiling this report.

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