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E*TRADE Financial Corporation ETFC recorded positive earnings surprise of 3.2% in fourth-quarter 2017. Adjusted earnings of 64 cents per share easily surpassed the Zacks Consensus Estimate of 62 cents. Results exclude tax expense related to tax reform and other one-time items.
Results reflected increased net revenues and a benefit to provision for loan losses. Daily average revenue trades (DARTs) increased year over year. Further, the quarter witnessed rise in customer accounts and reduced delinquencies. However, elevated operating expenses were on the downside.
Including tax expense $44 million or 16 cents per share and other non-recurring items, E*TRADE’s net income for the quarter came in at $129 million or 48 cents per share compared with $127 million or 46 cents reported in the prior-year quarter.
For full-year 2017, adjusted net income was $627 million or $2.19 per share, lagging the Zacks Consensus Estimate of $2.28. Including tax expense $13 million or 4 cents per share and other non-recurring items, net income came in at $614 million or $2.15 per share compared with $552 million or $1.98 in the prior year.
Revenues Escalate, Expenses Flare Up
For full-year 2017, total net revenues climbed 22.2% year over year to $2.37 billion, driven by a rise in net interest income as well as non-interest income. Moreover, results outpaced the Zacks Consensus Estimate of $2.36 billion.
Net revenues for the reported quarter came in at $637 million, surpassing the Zacks Consensus Estimate of $633.1 million. Revenues were up 25.1% from the year-ago quarter.
Net interest income surged 45.5% on a year-over-year basis to $419 million, primarily due to higher interest income and lower interest expense. Net interest margin was 2.92%, up from 2.60% in the prior-year quarter.
Non-interest income of $218 million edged down 1.4% from the year-ago quarter. The reported quarter recorded lower commissions, partially offset by higher fees and service charges.
Total non-interest expenses flared up 13% year over year to $364 million. The increase was due to rise in almost all the expense components.
Improved Trading Performance
Total DARTs increased 26% year over year to 236,000 in the reported quarter, including 29% in derivatives. At the end of the quarter, E*TRADE had 5.4 million customer accounts (including 3.6 million brokerage accounts), up 4% from the year-ago quarter.
Additionally, DARTs for the full year were 214,000, up 30.5% year over year, including 30% in derivatives.
Further, the company’s total customer assets were $383.3 billion, up 23% year over year. Brokerage-related cash grew 3% year over year to $52.9 billion.
Notably, customers were net buyers of about $2.3 billion of securities compared with net sellers of $0.8 billion in the prior-year quarter. Net new brokerage assets totaled $3.2 billion, in line with the year-earlier quarter.
Credit Quality Marks Significant Improvement
Overall, credit quality improved at E*TRADE. Net recoveries were $6 million in the reported quarter compared with $4 million recorded in the prior-year quarter. Also, the company witnessed a provision benefit of $26 million compared with $18 million in the year-ago quarter.
Allowance for loan losses plummeted 66.5%, year over year, to $74 million. Additionally, total special delinquencies (30-89 days delinquent) dropped 14% year over year to $98 million in E*TRADE’s entire loan portfolio. Notably, total delinquent loans dipped 15.6% year over year to $249 million.
http://files.shareholder.com/downlo...C7EEB337E875/ETFC_News_2018_1_25_Earnings.pdf
E*TRADE Financial Corporation - Quarterly Earnings
