E-Trade says improving loan portfolio helped narrow loss in 1st quarter

E-Trade says loss narrows in 1st quarter

NEW YORK — Online discount broker E-Trade Financial Corp. said Wednesday that its loss narrowed in the first quarter as its troubled loan portfolio showed signs of improvement.

For the first three months of the year, the company lost $47.8 million, or 2 cents per share, compared with a loss of $232.7 million, or 41 cents per share, in the year-ago period.

Despite the continued streak of quarterly losses and lackluster trading revenue in the latest quarter, the performance beat Wall Street expectations. On average, analysts polled by Thomson Reuters expected a loss of 3 cents per share.

New York-based E-Trade said provisions for loan losses in the quarter were $268 million, down from $454 million in first quarter of 2009. The company’s net charge-offs in the quarter were $288 million, an 11 percent drop from the year-ago period.

Although the company is known for its online brokerage, it also offers banking services and mortgages.

E-Trade has been slammed by its investments in souring real estate loans and bonds backed by the troubled assets.

The company has been working to fortify its capital position through stock offerings and debt exchanges as it continues struggling with investment losses.

In the latest quarter, E-Trade noted that it continued reducing its balance sheet risk, with its loan portfolio shrinking by $1 billion from the prior quarter. The bulk of that reduction — about $700 million — was the result of prepayments or principal reductions, the company said.

The company’s quarterly revenue was $536.5 million, up from $497.3 million a year ago. That increase was largely the result of lower operating interest expense, however.

Revenue from commissions fell 10 percent to $113.3 million and revenue from fees and service charges also decreased 10 percent to $42.2 million. The drop reflected a decline in trading activity, as well as a simplified commission structure and the elimination of inactivity fees on brokerage accounts.

The company said those pricing changes were intended to boost customer satisfaction as part of a renewed focus on its core brokerage business.

For the quarter, daily average revenue trades decreased 11 percent to 155,000. Total customer assets increased to $162 billion from $110 billion in the prior year.

Amid the turmoil, E-Trade has also undergone several leadership changes in the past two years. The latest quarter included the appointment of new CEO Steven Freiberg, formerly of Citigroup.

He replaced Robert Druskin, who had been acting as interim CEO since the end of last year. Prior to that, Donald Layton, a former JPMorgan Chase & Co. vice chairman, had been named to the top post in March 2008 to help extricate the company from its steep investment losses.

Shares of E-Trade rose 5 cents, or 2.8 percent, to close at $1.82.