E*Trade Group, the third-largest online brokerage in the United States, said Wednesday it squeaked out a razor-thin fiscal third-quarter profit on revenues that fell sharply as trading volumes withered. Analysts had expected a loss of one cent per share, but the Menlo Park, California-based company managed a profit of 2 cents per share, or $5.7 million (US$).
The Nasdaq-listed company, which trades under the symbol EGRP, reported revenues of $330 million, up 77 percent from the same period a year ago, but down 18.7 percent from the $407 million reported during the booming second quarter.
E*Trade’s positive report comes as some of its chief rivals are struggling. Charles Schwab Corp., the largest U.S. online broker, this week reported its second-quarter earnings fell 25 percent compared to a year ago, on revenues 26 percent higher. The decline was attributed to a $44 million charge against earnings stemming from its $2.7 billion acquisition of U.S. Trust, a money management firm.
Meanwhile, DLJdirect, Inc., an online brokerage owned by New York-based Donaldson, Lufkin & Jenrette, lost $6.6 million in its just-ended second quarter.
E*Trade chairman of the board and chief executive officer Christos M. Cotsakos said his company’s improving results indicate that it is executing more efficiently than its rivals. “Even with the market experiencing extreme volatility in the recent quarter, E*Trade’s blue-chip brand, scale and agility continued to decouple us from the competition and drive our revenue growth and profitability,” he said.
E*Trade’s report was accompanied by indications that it is succeeding in its effort to emphasize managing customer assets over simply gathering customers. The company reported customer assets rose to $60.7 billion, up 121 percent from a year ago, as asset inflows increased by 74 percent to $7.6 billion. It continued to attract new customers, growing by nearly 330,000 to almost three million. A year ago, the company had just 1.3 million accounts.
Average transactions per day were 169,000, up 109 percent from 80,600 a year ago.
Bottom-line results were sharply better than the net loss of $23.7 million, or 8 cents per share, reported in 2000’s second quarter. E*Trade, like its customers, has benefited from market gains over the last year. The company reported a $24.4 million gain on sale of investments, nearly three times the amount gained from sale of investments in the same time last year.