E*Trade Financial Corporation Earnings Beat Expectations but Fall Short of Q1

Today after the market closed, E*Trade (NASDAQ: ETFC  ) announced its Q2 earnings in which it saw a sizable improvement over the second quarter of last year, but a dip relative to the first quarter.

Earnings per share stood at $0.24, which was a sizable improvement over the loss of $0.19 per share in the second quarter of last year. However, it was well below the $0.33 in Q1 2014.

In the second quarter of last year, E*Trade recognized a $142 million goodwill impairment resulting from its exit of its market-making business. Excluding the loss associated with this exit and $10 million in restructuring charges, E*Trade earnings stood at $0.21 per share, on a net income of $60 million.

 Metric

Q2 2013

Q1 2014

Q2 2014

Y-o-Y Change

Q-o-Q Change

Earnings Per Share

$0.21

$0.33

$0.24

14.3%

(27.3%)

Net Income

$60

$97

$69

15%

(28.9%)

$in millions. Source: Company investor relations.

The reason behind the decline relative to the first quarter was the result of a 22% drop in its daily average revenue trades to 155,000. As a result, commission revenue fell by 18% to $105 million. In total, net revenue at E*Trade fell by 8% relative to the first quarter, to $438 million. It was also down slightly from the $440 million in Q2 2013.

On the positive side, E*Trade said it saw an increase in accounts of 33,000, which was 10% above the 30,000 added in the second quarter of last year. But it was well below the 72,000 net new accounts seen in the first quarter.

"We had a successful second quarter, characterized by continued growth in the brokerage business, even as trading activity moderated industrywide," E*Trade CEO Paul Idzik said in the announcement. "Through the first half of the year we have already surpassed the previous year's total for net new brokerage accounts, margin loan balances remained near record highs, and total customer assets have again reached all-time highs."

In total, the earnings of $0.24 per share in the second quarter surpassed the $0.23 expectation of the 15 analysts surveyed by Yahoo! Finance.

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