E*TRADE Looks A Tad Brighter (ETFC)

E*TRADE Financial Corporation (NASDAQ: ETFC) posted some fairly poor earnings considering the improvements seen elsewhere. The good news is that these earnings are actually better or less-bad than estimates.  Its loss was -$0.22 EPS compared to the Thomson Reuters estimates of -$0.31 EPS.  The company is trying to keep making progress on its its balance sheet and capitalization.

The troubled online broker (and former risky mortgage lender) is reducing balance sheet exposure, by about $1.3 billion in risk from last quarter.  Roughly $900 million was related to prepayments or scheduled principal reductions.

The company is also reducing liabilities after those tenders.  Its customer cash and deposits fell about $700 million to $33.7 billion.  There was roughly a $1 billion increase in brokerage cash that was offset by a $1.7 billion reduction in CSA and other bank deposits.  Margin receivables rose to $3.1 billion from $2.4 billion.

Its Q2 loan loss provisions actually fell by $49 million to $405 million, while the total allowance for loan losses was roughly steady at $1.2 billion. Total net charge-offs rose by $53 million to $386 million.

E*TRADE stock closed up over 5% at $1.36 on the day, and shares are up around $1.38 on the day.  It is never wise to declare a near-disaster as being over, but this quarterly report and the recapitalization from Citadel is getting to the point that at least a tad more clarity seems easier to fathom compared to recent quarters.

JON C. OGG