E-Trade Quarterly Results Show Broad-Based Gains

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EtradeE-Trade recently released its results for the first quarter of 2011. The company ended the quarter on a high note, with improvements across its divisions: growth in its brokerage income, an increase in both interest and non-interest revenue, a reduction in provisions for loan losses, and tighter expense management. E-Trade (ETFC) competes with firms like Charles Schwab, (SCHW) Ameritrade (AMTD), Wells Fargo (WFC) and Bank of America (BAC).

We have a $16.88 price estimate for E-Trade stock, slightly higher than its market price.

Results at a Glance

E-Trade reported total net revenue of $537 million for the quarter. The company had the exact same revenue figure for the first quarter of 2010, and this represents a nominal 4% growth over the $518 million revenues reported from the fourth quarter of 2010. The significant improvement, however, was seen in its net income figures. The company reported net income of $45 million for the period, compared with a net loss of $24 million in the prior quarter, and a net loss of $48 million in the first quarter of 2010.

The improvement in expense management is evident from the fact that there has been a marked decrease in miscellaneous operating expenses. The increase in advertising and marketing revenues is what likely helped the company attract a net 51,000 new brokerage accounts in the quarter.

Focus on Brokerage

E-Trade has significantly expanded its sales force in the recent past to build and extend its relationships with retail investors. It has also been concentrating on providing innovative investor solutions, such as it online social community platform for investors to share information -- something we talked about at length in our article, A "Social" Cause: E-Trade Social Networking Platform Spells Stock Upside.

The company now has 2.7 million active online brokerage accounts. The focus on improving its brokerage business helps E-Trade in multiple ways, as it not only earns income through commissions from investors when they trade online, but also earns interest on the funds deposited with the company by the investors so they'll be able to trade in the first place.

E-Trade seems to have figured out what it really needs to focus on in order to stay ahead in the race among brokerage firms.

See our full analysis for E-Trade

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