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E*TRADE Initiates $800M Share Buyback: Time to Buy?

Ushering in good news for shareholders, online broker age firm, E*TRADE Financial CorporationETFC announced a repurchase authorization of up to $800 million of its common stock. The program expires on Mar 31, 2017.

The latest share repurchase authorization marked the first in over eight years, in which the New York-based firm returned capital to shareholders through a share buyback.

The major move not only signifies E*TRADE's focus on rewarding shareholders but reflects a strong capital position as well. As of Sep 30, 2015, E*TRADE reported Tier 1 risk-based capital ratio of 39.5%, compared to 18.5% in the year-ago quarter. Total risk-based capital ratio was 44.3%, compared to 19.7% in the prior-year quarter. Tier 1 leverage ratio was 8.5%, versus 7.7% in the year-ago quarter.

Further, E*TRADE has expedited efforts towards strengthening its balance sheet. Notably, during the third quarter 2015, the company eliminated its entire wholesale funding obligations from its bank balance sheet, which is expected to significantly improve the company's balance sheet composition with the removal of high-cost funding and creating capacity to onboard low-cost deposits over several upcoming quarters.

Further, the company remains on track to reduce its legacy loan portfolio. Also, E*TRADE exhibited successful efforts in achieving its target of reducing debt to $1 billion. The company now targets a balance sheet size of $50 billion by early 2016. As of Sep 30, 2015, the company's total assets stood at $41.2 billion.

With online innovations and introduction of new products and services, E*TRADE is likely to expand its client base. Last year, the company revamped the E*TRADE brand and currently remains focused on improving its technology space to offer a better digital experience to customers. According to the monthly market activity report for October, E*TRADE's daily average revenue trades (DARTs) were 144,607, up 4% from the prior month.

Notably, shares of E*TRADE has gained over 24% year to date. With the share buyback authorization, balance sheet strengthening moves and the company's focus on expansion of trading platforms capabilities, we believe the stock to be an attractive choice for investors. We also believe that as the company strengthens its overall performance, it may gradually enhance shareholders value with a dividend payment as well.

E*TRADE currently carries a Zacks Rank #1 (Strong Buy). Some other top-ranked stocks in the finance space include Beneficial Bancorp, Inc. BNCL , Arlington Asset Investment Corp. AI and KCG Holdings, Inc. KCG . While Beneficial Bancorp sports the same rank as E*TRADE, both Arlington and KCG Holdings carry a Zacks Rank #2 (Buy).

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E TRADE FINL CP (ETFC): 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.


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

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