E*TRADE Financial Continues to Reduce Balance Sheet Risk - Analyst Blog


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On Jun 19, 2014, we issued an updated research report on E*TRADE Financial Corporation ( ETFC ). This New York-based investment brokerage firm has continuously exhibited efficient efforts in reducing the size and associated risks of its legacy loan portfolio.

In first-quarter 2014, E*TRADE opted for offloading a substantial part of its one- to four-family TDR (troubled debt restructurings) portfolio. The transaction was closed in April with a meagre gain. This substantially reduced the risk on its legacy loan portfolio and paved the way for earnings growth.

The company's loan portfolio stood at $7.4 billion at the end of the quarter, down 26.4% year over year. Notably, it declined 19% in 2013, following the run-down of 19.5% in 2012, 18.5% in 2011 and 20.6% in 2010. We believe that successful completion of the balance sheet restructuring will significantly strengthen the company's financials in the mid to long term.

Further, driven by strong brokerage activity, E*TRADE reported first-quarter 2014 earnings per share of 33 cents, beating the Zacks Consensus Estimate by 43.5%. Daily average revenue trades (DARTs) for the quarter escalated 33.3% year over year to 197,944, which was the highest in a period of around 5 years.

Despite these positives, we believe there are certain concerns that may pose threats to the company's financials in the near term. These include a low interest rate environment
and the prevailing stringent regulatory landscape.

Further, over the past 60 days, the Zacks Consensus Estimate declined nearly 2.8% to $1.03 per share for 2014. Also, for 2015, it fell 2.4% to $1.21 per share.

E*TRADE currently carries a Zacks Rank #3 (Hold).

Arlington Asset Investment Corp. ( AI ), Cowen Group, Inc. ( COWN ) and Evercore Partners Inc. ( EVR ) are better-ranked stocks in this space. Arlington sports a Zacks Rank #1 (Strong Buy) while both Cowen Group and Evercore hold a Zacks Rank #2 (Buy).

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E TRADE FINL CP (ETFC): Free Stock Analysis Report

COWEN GROUP INC (COWN): Free Stock Analysis Report

EVERCORE PARTNR (EVR): Free Stock Analysis Report

ARLINGTON ASSET (AI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
More Headlines for: ETFC , COWN , EVR , AI

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