It's no secret: E*Trade Financial Corp.'s (NASDAQ:ETFC) grand experiment of trying to transform itself into a player in the mortgage market has been a complete failure. The online broker tried to diversify its revenue stream with an experimental foray into toxic mortgages, which only left the company deep in debt. How deep the current status of the trouble is will be seen when E*Trade's second-quarter earnings are announced Wednesday after market close at 5 p.m. ET.
Analysts expect the company to post its eighth-consecutive quarterly loss at 38 cents per share. That number is in the ballpark of the 41 cents per share, or $232.7 million, loss in the first quarter that E*Trade registered. The company got some breathing room in the second quarter when it exchanged $1.7 billion of its interest-bearing senior unsecured bonds for convertibles notes due 10 years from now. Additionally, the company raised additional capital from a $600 million stock offering. But is this enough for E*Trade? For now, possibly yes, but investors aren't expecting to see a profit in 2009 and possibly in 2010 as well, an outlook that'll likely continue to weigh down the stock, which closed at $1.29 on Tuesday.
E*Trade may see a brighter future with a sale or at least a major divestment to a competitor. Why? The online trading sector seems to be a mature sector with new customers hard to come by, especially with the downturn of the equities market. The experiment of expanding into mortgages was an abysmal failure, and there's not many other sectors that E*Trade can grow in, except possibly by entertaining a deal with a peer or an established bank looking for an online broker play. - Gerald Magpily
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Showing posts with label E*Trade Financial Corp. Show all posts
Showing posts with label E*Trade Financial Corp. Show all posts
Thursday, July 30, 2009
Sunday, July 12, 2009
EARNINGS PREVIEW: US Online Brokers To Post Lower Numbers
TAKING THE PULSE: Quarterly earnings will fall from a year earlier for online brokers as they struggle with lower stock prices and low interest rates.
The strongest two online brokers, Charles Schwab Corp. (SCHW) and TD Ameritrade Holding Corp. (AMTD), should benefit from higher-than-expected retail trading. The rise in trading followed March's stock market rally, and will boost a measure called daily average revenue trades.
E*Trade Financial Corp. (ETFC) also benefited from a revival in trading, but that benefit is expected to be swamped by its continuing efforts to work through mortgage woes in its banking subsidiary.
All three online brokers are seeing lower revenue due to the market decline, which has reduced assets under management from a year earlier. Moreover, money-market-fund fee waivers, made necessary by extremely low short-term interest rates, are also hitting revenues in the group. Low interest rates also continue to pressure net interest income at online brokers.
Key Issues: Although fees earned on assets account for just under half of Schwab's quarterly revenue, some analysts are projecting a quarter-over-quarter increase in assets - with JMP Securities projecting a rise of 11%. Such an improvement would help offset the impact of roughly $60 million in money-fund fee waivers. Net interest income will continue to decline, though continued resilience in retail trading, deposit growth at the bank and a recovery in margin balances could mitigate the impact.
Key Issues: While TD Ameritrade, like Schwab, faces damage from fee waivers, Fox-Pitt also estimates a 21% quarterly decline in fund-fee revenue. The company closed its acquisition of options broker thinkorswim, which won't significantly impact earnings yet, but should aid in capturing share of the trading market. Commission revenue should rise from an increase in retail activity, while the shift to asset-gathering remains a big focus for investors.
Key Issues: E*Trade announced a long-awaited capital-raising plan in June that diluted shares but eased near-term uncertainty regarding its future. However, the quarterly focus remains on the amount of money the company sets aside to offset losses from bad loans. While brokerage results should remain in line with peers, investors could gain additional confidence in the franchise if E*Trade meets its pre-announced loan-loss provision estimate and reveals declines in delinquencies within its home-equity portfolio. In addition, E*Trade is still awaiting approval of its application for bailout money from the Troubled Asset Relief Program.
(The Thomson Reuters estimate and year-ago figures may not be comparable due to one-time items and other adjustments.)
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The strongest two online brokers, Charles Schwab Corp. (SCHW) and TD Ameritrade Holding Corp. (AMTD), should benefit from higher-than-expected retail trading. The rise in trading followed March's stock market rally, and will boost a measure called daily average revenue trades.
E*Trade Financial Corp. (ETFC) also benefited from a revival in trading, but that benefit is expected to be swamped by its continuing efforts to work through mortgage woes in its banking subsidiary.
All three online brokers are seeing lower revenue due to the market decline, which has reduced assets under management from a year earlier. Moreover, money-market-fund fee waivers, made necessary by extremely low short-term interest rates, are also hitting revenues in the group. Low interest rates also continue to pressure net interest income at online brokers.
COMPANIES TO WATCH: Charles Schwab Corp. (SCHW) - Reports July 16Wall Street Expectations: Analysts polled by Thomson Reuters, on average, expect earnings of 18 cents a share on revenue of $1.08 billion. A year ago, Schwab reported earnings of 26 cents a share on $1.3 billion in revenue.
Key Issues: Although fees earned on assets account for just under half of Schwab's quarterly revenue, some analysts are projecting a quarter-over-quarter increase in assets - with JMP Securities projecting a rise of 11%. Such an improvement would help offset the impact of roughly $60 million in money-fund fee waivers. Net interest income will continue to decline, though continued resilience in retail trading, deposit growth at the bank and a recovery in margin balances could mitigate the impact.
TD Ameritrade Holding Corp. (AMTD) - Reports July 21Wall Street Expectations: Unlike its industry peers, TD Ameritrade will report earnings for its fiscal third quarter. Analysts are looking for earnings of 28 cents a share on revenue of $571 million, compared with year-ago earnings of 34 cents a share on $623.6 million in revenue.
Key Issues: While TD Ameritrade, like Schwab, faces damage from fee waivers, Fox-Pitt also estimates a 21% quarterly decline in fund-fee revenue. The company closed its acquisition of options broker thinkorswim, which won't significantly impact earnings yet, but should aid in capturing share of the trading market. Commission revenue should rise from an increase in retail activity, while the shift to asset-gathering remains a big focus for investors.
E*Trade Financial Corp. (ETFC) - Reports July 22Wall Street Expectations: E*Trade is seen reporting a loss of 31 cents a share on $89 million in revenue. A year ago, E*Trade posted a loss of 19 cents a share on revenue of $532.3 million.
Key Issues: E*Trade announced a long-awaited capital-raising plan in June that diluted shares but eased near-term uncertainty regarding its future. However, the quarterly focus remains on the amount of money the company sets aside to offset losses from bad loans. While brokerage results should remain in line with peers, investors could gain additional confidence in the franchise if E*Trade meets its pre-announced loan-loss provision estimate and reveals declines in delinquencies within its home-equity portfolio. In addition, E*Trade is still awaiting approval of its application for bailout money from the Troubled Asset Relief Program.
(The Thomson Reuters estimate and year-ago figures may not be comparable due to one-time items and other adjustments.)
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Friday, July 10, 2009
CORRECT(7/1):Investors Tender $1.53B In Notes So Far For E*Trade
(The item "Investors Tender $1.53B In Notes So Far For E*Trade," published Wednesday at 7:50 p.m. EDT, misstated the amount of 2017 notes Citadel tendered in the third paragraph. The corrected version follows.)
DOW JONES NEWSWIRES
E*Trade Financial Corp. (ETFC) announced progression of its debt-exchange offer, saying $1.53 billion for its notes due 2011 and 2017 had been tendered.
Last month, the bank and online brokerage moved to exchange more than $1 billion of new 10-year zero-coupon convertible debt for all of its 8% senior notes due 2011 and some of its 12.5% springing lien notes due 2017.
As of 5 p.m. EDT Wednesday, about $428.2 million of 2011 notes and $1.1 billion of 2017 notes had been tendered, including $230.2 million of 2011 notes and $700 million of 2017 notes tendered by affiliates of Citadel Investment Group LLC. The hedge-fund giant, which bought 90.9 million shares through the company's stock offering, previously agreed to tender at least $800 million in E*Trade's long-term debt.
E*Trade said that it would pro-rate the exchange for 2017 notes because a larger number of holders other than Citadel tendered those notes.
Assuming the exchange offer is completed, the debentures issued in exchange for any notes tendered during the period ended midnight EDT July 1 will be Class A Debentures and have a conversion price of $1.034 a share.
E*Trade said approval of amendments and waivers to the indentures governing the 2011 and 2017 notes requires, with respect to each series, consents from holders of an absolute majority of the outstanding notes, as well as a majority of the notes not held by Citadel. Citadel has already agreed to deliver sufficient consents prior to the midnight deadline, E*Trade said Wednesday.
The early tender period remains open until midnight EDT.
Shares were up 0.7% at $1.36 in after-hours trading.
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DOW JONES NEWSWIRES
E*Trade Financial Corp. (ETFC) announced progression of its debt-exchange offer, saying $1.53 billion for its notes due 2011 and 2017 had been tendered.
Last month, the bank and online brokerage moved to exchange more than $1 billion of new 10-year zero-coupon convertible debt for all of its 8% senior notes due 2011 and some of its 12.5% springing lien notes due 2017.
As of 5 p.m. EDT Wednesday, about $428.2 million of 2011 notes and $1.1 billion of 2017 notes had been tendered, including $230.2 million of 2011 notes and $700 million of 2017 notes tendered by affiliates of Citadel Investment Group LLC. The hedge-fund giant, which bought 90.9 million shares through the company's stock offering, previously agreed to tender at least $800 million in E*Trade's long-term debt.
E*Trade said that it would pro-rate the exchange for 2017 notes because a larger number of holders other than Citadel tendered those notes.
Assuming the exchange offer is completed, the debentures issued in exchange for any notes tendered during the period ended midnight EDT July 1 will be Class A Debentures and have a conversion price of $1.034 a share.
E*Trade said approval of amendments and waivers to the indentures governing the 2011 and 2017 notes requires, with respect to each series, consents from holders of an absolute majority of the outstanding notes, as well as a majority of the notes not held by Citadel. Citadel has already agreed to deliver sufficient consents prior to the midnight deadline, E*Trade said Wednesday.
The early tender period remains open until midnight EDT.
Shares were up 0.7% at $1.36 in after-hours trading.
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Thursday, July 9, 2009
E*TRADE Makes a Good Trade
E*Trade's (Nasdaq: ETFC) debt exchange offer is a success. The online discount broker received commitments from its creditors to swap more than $1.8 billion in debt for new convertible bonds.
The healthy reception during the early tender period is the result of several factors.
* The new bonds don't bear interest as zero coupons, but the conversion terms are sweet. The Class A debentures can be turned into E*Trade stock, at a rate of just $1.034 per share.
* Citadel, E*Trade's largest shareholder and creditor, already committed to the deal, leading by example.
* With fears of even greater capital requirements looming, creditors realize that this is the best move to keep the discounter from buckling.
E*Trade still has a long way to go before it catches up to larger, profitable rivals TD AMERITRADE (Nasdaq: AMTD) and Charles Schwab (Nasdaq: SCHW). All 12 of the major analysts following the company expect E*Trade to post another loss this year. They're all over the map in their expectations for 2010, with a profit target range between a loss of $1.00 a share and a profit of $0.12 a share.
Trading activity has been brisk, and E*Trade continues to pad to its brokerage account totals. The recent rollout of apps for Apple (Nasdaq: AAPL) and Research In Motion (Nasdaq: RIMM) smartphones can only help, making its Web-based trading platform even stickier.
E*Trade's non-brokerage business has been going the other way, but it's hard to win online banking clients when money market yields are pathetic and borrowing standards are tightening.
The road to recovery will be long for E*Trade, but at least the discounter isn't making the dangerous mistake of standing still.
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The healthy reception during the early tender period is the result of several factors.
* The new bonds don't bear interest as zero coupons, but the conversion terms are sweet. The Class A debentures can be turned into E*Trade stock, at a rate of just $1.034 per share.
* Citadel, E*Trade's largest shareholder and creditor, already committed to the deal, leading by example.
* With fears of even greater capital requirements looming, creditors realize that this is the best move to keep the discounter from buckling.
E*Trade still has a long way to go before it catches up to larger, profitable rivals TD AMERITRADE (Nasdaq: AMTD) and Charles Schwab (Nasdaq: SCHW). All 12 of the major analysts following the company expect E*Trade to post another loss this year. They're all over the map in their expectations for 2010, with a profit target range between a loss of $1.00 a share and a profit of $0.12 a share.
Trading activity has been brisk, and E*Trade continues to pad to its brokerage account totals. The recent rollout of apps for Apple (Nasdaq: AAPL) and Research In Motion (Nasdaq: RIMM) smartphones can only help, making its Web-based trading platform even stickier.
E*Trade's non-brokerage business has been going the other way, but it's hard to win online banking clients when money market yields are pathetic and borrowing standards are tightening.
The road to recovery will be long for E*Trade, but at least the discounter isn't making the dangerous mistake of standing still.
source
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Wednesday, July 8, 2009
E*Trade To Exchange $1.7B Of Debt As Offer Tops Target
E*Trade Financial Corp. (ETFC) said it will exchange more than $1.7 billion in convertible debentures after about $1.83 billion in senior notes were tendered to its debt-exchange offer.
Last month, the bank and online brokerage moved to exchange more than $1 billion of the new 10-year zero-coupon convertible debt for all of its 8% senior notes due 2011 and some of its 12.5% springing lien notes due 2017.
E*Trade's shares were recently down 2.2% at $1.32 in premarket trading.
The bank and online brokerage has been looking to raise capital as the company continues to deal with surging loan losses.
E*Trade said Thursday that after the early tender period, about $429.6 million of 2011 notes and $1.41 billion of 2017 notes had been tendered, including $230.2 million of 2011 notes and $1 billion of the 2017 notes tendered by affiliates of Citadel Investment Group LLC. The hedge-fund giant, which bought 90.9 million shares in the company's recent stock offering, had previously agreed to tender at least $800 million in E*Trade's long-term debt.
The Citidel portion of the exchange is $300 million bigger than what was announced Wednesday night. E*Trade said Thursday that Citadel is making the maximum of its commitment to participate in the exchange offer.
The offer remains open at least another month, but because the maximum number of 2017 notes subject to the offer has already been tendered, it is effectively only open currently to 2011 notes not already tendered. E*Trade said 97% of 2011 notes not held by Citadel and 99% of 2017 notes have already been tendered.
Also, the exchange of the 2017 notes not held by Citadel will be pro-rated as E*Trade had said it would exchange up to $310 million of those. The amount tendered thus far is $407.2 million.
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Last month, the bank and online brokerage moved to exchange more than $1 billion of the new 10-year zero-coupon convertible debt for all of its 8% senior notes due 2011 and some of its 12.5% springing lien notes due 2017.
E*Trade's shares were recently down 2.2% at $1.32 in premarket trading.
The bank and online brokerage has been looking to raise capital as the company continues to deal with surging loan losses.
E*Trade said Thursday that after the early tender period, about $429.6 million of 2011 notes and $1.41 billion of 2017 notes had been tendered, including $230.2 million of 2011 notes and $1 billion of the 2017 notes tendered by affiliates of Citadel Investment Group LLC. The hedge-fund giant, which bought 90.9 million shares in the company's recent stock offering, had previously agreed to tender at least $800 million in E*Trade's long-term debt.
The Citidel portion of the exchange is $300 million bigger than what was announced Wednesday night. E*Trade said Thursday that Citadel is making the maximum of its commitment to participate in the exchange offer.
The offer remains open at least another month, but because the maximum number of 2017 notes subject to the offer has already been tendered, it is effectively only open currently to 2011 notes not already tendered. E*Trade said 97% of 2011 notes not held by Citadel and 99% of 2017 notes have already been tendered.
Also, the exchange of the 2017 notes not held by Citadel will be pro-rated as E*Trade had said it would exchange up to $310 million of those. The amount tendered thus far is $407.2 million.
Another interesting article about Online Stock Market Trading. To get more updates on Online stock market Trading news, stock market charts, stock market investing, futures trading or options trading, subscribe to Online Stock Market Trading now!
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