E-Trade's 3Q loss widens on charge

By CANDICE CHOI

posted: 29 DAYS 14 HOURS AGO

Text SizeAAA

NEW YORK -Online brokerage E-Trade Financial Corp. on Tuesday said its loss widened in the third quarter in large part because of a hefty charge it took to shore up its capital position.

For the three months ending Sept. 30, the company lost $832 million, or 66 cents per share. That compared with a loss of $50 million, or 9 cents per share, in the year-earlier period.

The latest results included a $773 million charge in relation to a $1.74 billion debt exchange.

Excluding that, the company lost $59 million, or 5 cents per share, for the quarter. Analysts polled by Thomson Reuters, who do not include one-time charges, forecast a loss of 6 cents per share.

While the company's trading activity has been volatile in recent quarters, E-Trade's streak of dismal earnings have largely been the result of its souring investments.

E-Trade was slammed by the recession and credit crisis in part because of the firm's investments in real estate loans and bonds backed by the troubled assets.

The New York company has been working to improve its capital position through debt exchange and stock offerings as it continues facing losses from those investments. As part of the $1.74 billion debt exchange in August, the company swapped out senior notes due in 2011 and other notes due in 2017 for new debt that can eventually be converted into common stock.

Exchanging the debt lets the company cut interest payments and fortify its ownership base.

About a year ago, the company also sold a number of assets to raise capital. Among the sales were its Canadian business for $515 million and its stake in an Indian brokerage for $145 million.

CEO Donald Layton had even contemplated taking advantage of the government's bailout of financial institutions, although E-Trade never ended up receiving any money.

Despite its ongoing investment troubles, Layton noted that the company's third-quarter results suggest that its core business is healthy, as average investors start returning to the market.

Quarterly revenue was $575.3 million, up 52 percent from $377.7 million in the year-ago period. Total daily average revenue trades were 196,413 for the quarter, up 7 percent from the same period in 2008.

At the end of the quarter, E-Trade said it had 4.5 million customers accounts, which included a record 2.7 million brokerage accounts.

Total customer assets rose to $148.7 billion, up from $142.2 billion the same time last year.

E-Trade shares were unchanged in after-hours trading following the release of the earnings report. In the regular session, the stock fell 3 cents to close at $1.57.

2009-10-27 19:15:06