E*TRADE Financial Corporation (NASDAQ:ETFC) Q1 2016 Earnings Conference Call Transcript

Apr 21, 2016 • 05:00 pm ET


E*TRADE Financial Corporation (NASDAQ:ETFC) Q1 2016 Earnings Conference Call Transcript


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Good evening, and thank you for joining E*TRADE's First Quarter 2016 Earnings Conference Call. Joining the call today are CEO, Mr. Paul Idzik; and CFO, Mr. Michael Pizzi. (Forward-Looking Cautionary Statements) All of these documents are available at about.etrade.com. This call will present information as of April 21, 2016. The company disclaims any duty to update forward-looking statements made during the call.This call is being recorded, and a replay will be available via phone and webcast later this evening at about.etrade.com. No other recordings or copies of this call are authorized or may be relied upon.With that, I will now turn the call over to Mr. Idzik.

Paul Thomas Idzik

Thank you, Ashwin. Good evening and thank you for joining us to reflect on what has been a meaningful quarter for E*TRADE. We kicked off the year with solid play by all our lines, as we posted strong results, continued to roll out enhancements to our customer offering, and deployed a considerable quantum of capital to shareholders.

Amidst a market environment characterized by trepidation and unease, we posted respectable growth in the business as our customers remained relatively active. Our results again benefited from the dwindling size and better-than-expected performance of our legacy loan portfolio, and we made significant progress on our premeditated march towards a $50 billion balance sheet. Meanwhile, we began managing the bank to a lower Tier-1 leverage ratio, distributed a considerable amount of capital to the parent, and continued to put capital to work for our owners.

Starting with our results, we reported net income of $153 million, or $0.53 per share for the quarter. On the metrics, customer activity increased sequentially, a trend that is typical in Q1. We also traditionally expect an uptick in activity from our corporate services customers in Q1 and that trend was less pronounced, attributable to the underperformance of the market. Options contributed a steady 23% of total DARTs. Additionally, the portion of trades executed by our mobile platforms held steady at 16%. In April to date, DARTs are tracking down 1% from March.

In terms of sentiment, Q1 presented a bleak opening for our customers as the markets kicked off January with one of the worst starts in history. Confidence in activity improved through the quarter, and by March end, it seemed the Cimmerian curtain had lifted. The sum total of this quarter's activity was solid, with our customers being net buyers of $1.2 billion of securities, while exhibiting some purposeful de-risking behavior.

Margin balances were dialed back by slightly over $1 billion with balances averaging $6.7 billion and ending the period at $6.3 billion for the quarter. In April to-date, balances are flat where they ended the quarter.Meanwhile, we continued to post solid growth. Excluding the impact of shuttering our Hong Kong and Singapore operations, we added 45,000 net new brokerage accounts during the quarter, while our adjusted attrition rate improved to 7.3%, both of which represent our best quarterly marks in two years.

We added $2.9 billion of net new brokerage