* 2nd-qtr net loss $54.4 mln vs profit $39.5 mln year
* 2nd-qtr loss 19 cents/shr vs est profit 12 cents/shr
* Revenue down 3 pct
* Takes impairment charge of $142 mln to exit market making
* 30,000 new brokerage accounts added during the quarter
July 24 Discount brokerage E*Trade Financial
Corp reported a quarterly loss due to an impairment
charge of $142 million to account for its surprise exit from
The dismantling of the market-making unit, which executes
trades in many of the stock orders placed by E*Trade customers
and those of smaller brokerage firms, is a final capitulation to
the firm's former largest investor, Citadel LLC.
E*Trade shares were up 2.8 percent in after-hours trading.
Citadel and its founder Kenneth Griffin plowed more than
$2.6 billion into E*Trade to help rescue the troubled discount
broker and bank between 2007 and March this year, when the hedge
fund sold its entire 9.6 percent stake at a profit of more than
$800 million, according to well-placed sources.
E*Trade agreed last year to improve its order-handling
procedures after Griffin, whose firm competes with E*Trade to
execute trades, had criticized its order execution processes as
"Our decision to exit the market-making business underscores
management's intensifying focus on our core customer franchise
and the desire to concentrate our efforts on areas that directly
support the core of the company," E*Trade Chief Executive Paul
Idzik said in a statement on Wednesday.
E*Trade reported a net loss of $54.4 million, or 19 cents
per share, for the second quarter, compared with a profit $39.5
million, or 14 cents per share, a year earlier. Revenue fell
about 3 percent to $439.9 million.
Excluding the impairment charge, E*Trade reported a net
profit of 21 cents per share. Analysts on an average expected
earnings of 12 cents per share on that basis on revenue of
$419.8 million, according to Thomson Reuters I/B/E/S.
The company added a net 30,000 brokerage accounts during the
quarter along with $220 billion in new customer assets.
E*Trade's provision for loan losses fell to $46.1 million
during the quarter from $67.3 million a year earlier, a sign of
a contraction in its bad loan portfolio.
E*Trade, which has been dragged down by its core retail
brokerage business due to sliding revenue, appointed Navtej
Nandra as the head of the division in April in an effort to
revive its fortunes.
The company suffered hundreds of millions of dollars of
losses from making subprime mortgage loans during the financial
crisis that began in late 2007.
Rival Charles Schwab Corp reported a slide in its
second quarter profit last week due to higher expenses, which
outstripped higher-than-expected revenue.
E*Trade's Tier One leverage ratio, a key measure of its
capital strength that is being closely watched by investors,
rose to 9.5 percent of assets from 7.9 percent a year earlier.
The company said it expects to ask regulators to let its
bank move excess cash to its holding company when the ratio
reaches 9.5 percent, giving the brokerage cash for growth and
allowing for a potential distribution to investors through
dividends or share buybacks.
Shares of New York-based E*Trade, which is up more than 40
percent since it declared its last quarterly results, closed at
$13.62 on the Nasdaq on Wednesday.