E*TRADE Financial Corporation (NASDAQ:ETFC) Q2 2017 Earnings Conference Call Transcript

Jul 20, 2017 • 05:00 pm ET


E*TRADE Financial Corporation (NASDAQ:ETFC) Q2 2017 Earnings Conference Call Transcript


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Good evening, and thank you for joining E*TRADE's Second Quarter 2017 Earnings Conference Call. Joining the call today are CEO, Karl Roessner; and CFO, Michael Pizzi.

(Forward-Looking Cautionary Statements)

During the call, the company will also discuss non-GAAP financial measures. For a reconciliation of such non-GAAP measures to the comparable GAAP figures and for a discussion of additional risks and uncertainties that may affect the future results of E*TRADE Financial, please refer to the company's earnings release furnished on Form 8-K, along with Form 10-Ks, 10-Qs and other documents the company has filed with the SEC. All of these documents are also available at about.etrade.com.

Note that the company has not reconciled its forward-looking non-GAAP measures, including non-GAAP adjusted operating margin, to the most directly comparable GAAP measures because material items that impact that measure are out of the company's control and cannot be reasonably predicted.

(Forward-Looking Cautionary Statements)

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. Roessner.

Karl Roessner

Thank you, Ash. Good evening, and thank you for joining. It's a pleasure to speak with you again, especially in the wake of such strong results and solid progress on our key initiatives. We have a lot to cover tonight, so I'll get right to it with a brief rundown of the Q2 highlights, all of which we will address in more detail.

During the quarter, we marched forward on the integration of OptionsHouse, establishing many of the back and middle office connections, which set the stage for the clearing conversion expected in early August. We rolled out a bold new marketing campaign, beginning with our brand relaunch that returns us to our irreverent roots as a challenger brand.

We delivered solid business growth with our best Q2 ever for asset growth and year-to-date account growth at the top of our target range. We recorded robust customer activity with record DARTs, a record mix of derivative trades, record customer net buying and end-of-period customer margin balances that matched our previous record.

We generated solid revenue growth, in spite of absorbing a full period of reduced commissions. We grew our balance sheet as planned, flexing the expanded earnings power that comes from more fully monetizing our customer deposits. And we meaningfully reduced our allowance for loan losses to reflect the preponderance of positive performance data on loans that have converted to amortizing.

And as if that's not enough, today, we announced a reduction in our consolidated Tier 1 leverage threshold of 50 basis points, unlocking significant capital to be deployed to the benefit of our shareholders. Given our financial performance and the 50 basis point move, we are commencing a $1 billion share repurchase program, which we expect to complete by the end of 2018. Not too shabby for what are typically placid Q2 months.