STRATEGIC PARTNERS
July 17, 2002
MENLO PARK, Calif. -- E*TRADE Group (ET) reported operating income of $38.8 million, or 11 cents per share, for the second quarter ended June 30. That compared with $5.4 million, or 2 cents per share, in the year-earlier period.
Revenue in the most recent quarter rose to $316 million from $308 million for the same period a year ago, a 3 percent increase.
Analysts had been expecting earnings ranging from 7 cents to 11 cents per share, with an average forecast of 10 cents per share, according to research firm Thomson First Call. E*TRADE also said it expects to meet analysts' estimates of 45 cents per share from ongoing operations for the entire year.
The company's profit from ongoing operations excluded a $23.5 million gain from an re-negotiated contract with its chief executive officer, Christos M. Cotsakos.
Cotsakos agreed in May to refund $23.5 million in salary and other benefits over the next two years. The concession came shortly after E-Trade filed Securities and Exchange disclosing it had rewarded the CEO an $80 million package after the company suffered a $241 million loss in 2001. (See related story E*TRADE chairman's compensation is renegotiated)
Cotsakos' decision to put greater emphasis on E*TRADE's online bank and its consumer loan business helped shield the company from the stock market downfall that continues to bedevil the company's brokerage business. E*TRADE's brokerage division collected revenue of $215.1 million, down from $229.3 million last year.
The online bank generated $100.9 million in banking revenue, a 28 percent increase from last year, even though the company lost some customers during the quarter. E-Trade's bank ended the latest quarter with 503,830 banking accounts -- 3 percent fewer than it had March 31.
The company attributed the decline to a decision to lower its deposit rates to boost its profit margins. Management assured analysts that the customer defections were less severe than the company had projected after deciding to lower its rates.
