E*Trade Financial profit soars as loan loss provision falls

April 23 Wed Apr 23, 2014 4:10pm EDT

April 23 (Reuters) - Discount brokerage E*Trade Financial Corp's quarterly profit more than doubled, helped by a drop in provision for loan losses and a surge in trading activity.

The company's net income rose to $97 million, or 33 cents per share, in the first quarter ended March 31, from $35 million, or 12 cents per share, a year earlier.

That handily beat analysts' average forecast of 23 cents per share, according to Thomson Reuters I/B/E/S.

The company's net revenue rose 13 percent to $475 million, also beating the analysts' average estimate of $454.6 million.

E*Trade, which was on the brink of failure during the financial crisis due to its bank's subprime mortgage portfolio, set aside $4 million to cover loan losses, well below the $43 million it set aside a year earlier.

"Overall positive investor sentiment elevated brokerage activity to its highest level in nearly five years, which aided our record net new brokerage assets and brokerage account retention," Chief Executive Paul Idzik said in a statement.

Daily average trades hit 198,000 in the quarter, the highest level in almost five years. The company's average commission fell 6 percent to $10.64 per trade.

New brokerage accounts rose about 5 percent to 3.07 million.

Investors' growing enthusiasm for investing also helped TD Ameritrade Holding Corp. The biggest U.S. discount broker said on Wednesday that its clients made an average of 492,000 daily trades in the quarter, a firm record.

Last week, discount broker Charles Schwab Corp reported a higher-than-expected quarterly profit due to a rise in trading commissions and fees for managing client assets.

E*Trade's total headcount, including consultants, rose 7 percent to 3,144 people in the quarter.

Wells Fargo raised its rating on the company's stock to "outperform" from "market perform" before the results were released on Wednesday, saying E*Trade was likely to continue using capital at its bank to pay down debt and thus eliminate its high interest payments.

In the first quarter, regulators allowed E*Trade's bank to lend the company $75 million. The firm also sold $800 million of subprime home mortgage loans and booked $76 million on the sale of its market-making business during the quarter.

E*Trade's Tier One leverage ratio, a key measure of its capital strength that is closely watched by investors, rose to 7 percent from 6 percent a year earlier.

The New York-based company's shares, which have more than doubled in past 12 months, closed at $21.50 on the Nasdaq. (Reporting By Neha Dimri in Bangalore; Editing by Simon Jennings)