E*Trade Financial Profit Jumps 83% as Market Activity Surges

Earnings Reuters

Discount brokerage E*Trade Financial Corp (ETFC) reported a better-than-expected 83 percent jump in third-quarter profit on Tuesday as trading activity surged and it set aside less money to cover bad loans.

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The company's net income rose to $86 million, or 29 cents per share, in the three months ended Sept. 30, from $47 million, or 16 cents per share, a year earlier.

Net revenue rose 5.5 percent to $440 million.

Analysts on average had expected earnings of 22 cents per share on revenue of $424.9 million, according to Thomson Reuters I/B/E/S.

"Our core business showed strength despite the typically slower summer months and uncertainty in the broader global markets," Chief Executive Paul Idzik said in a statement.

Trading and investing income rose 22.3 percent to $170 million.

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Discount brokers' profits are tied to both customer trading activity and interest rates on the cash customers have in their accounts.

E*Trade added 24,000 new brokerage accounts during the quarter, compared with 13,000 in the third quarter of 2013.

The company, which almost failed during the financial crisis due to its bank's subprime mortgage portfolio, set aside $10 million to cover loan losses, down from $37 million in the year-earlier quarter.

Daily average revenue trades rose 5.75 percent to 153,494, while the average commission fell marginally to $11.05 per trade from $11.15.

Discount brokerage pioneer Charles Schwab Corp said last week that its third-quarter profit climbed 11 percent from a year earlier due to double-digit growth in management fees and interest revenue.

E*Trade's consolidated Tier 1 leverage ratio, a key measure of its capital strength that is closely watched by investors, rose to 7.7 percent from 7.5 percent in the prior quarter.

The company's shares were slightly higher at $21.18 in extended trading after closing at $20.94 on the Nasdaq. The stock has gained about 6.6 percent this year.

(Reporting by Amrutha Gayathri and Avik Das in Bangalore; Editing by Ted Kerr)