Online brokerage E-Trade Financial Corp. said today its first-quarter loss grew sharply as it nearly doubled its provision for loan losses from the previous year.
Online brokerage E-Trade Financial Corp. said today its first-quarter loss grew sharply as it nearly doubled its provision for loan losses from the previous year.
Shares in the New York-based firm, which has been hampered by its mortgage-lending business, plummeted after it also said regulators advised it to raise new capital for its bank and reduce the leverage of its holding company in the near term.
"Given the uncertainties of the current environment, we believe that it is necessary to further improve the company's capital position," E-Trade's Chairman and Chief Executive Don Layton said in a statement.
E-Trade said improving its capital position would "would involve public-market issuance and/or private investors and would create significant dilution to current shareholders."
The news sent the company's shares down 62 cents, or 25 percent, to $1.84 in after-hours dealings. They closed the regular session up 11 cents at $2.46 before the earnings announcement.
E-Trade applied to receive $800 million under the government's capital purchase program, which is part of the government's $700 billion Troubled Asset Relief Program, back in November. It is still waiting to hear for approval.
For the first three months of the year, the firm lost $232.7 million, or 41 cents per share, compared with a loss of $91.2 million, or 20 cents per share, a year ago. Total net revenue decreased 6 percent to $497.3 million.
Analysts polled by Thomson Reuters, on average, expected a loss of 40 cents per share.
The company's provision for loan losses nearly doubled from the year ago period, as it set aside $454 million during the first quarter. That, however, was down $59 million from the fourth quarter. Total allowance for loan losses now stands at $1.2 billion.
Net operating interest income, or the difference between how much it costs to borrow money and how much the company receives from lending money to customers, fell 14.6 percent to $278.7 million from $326.4 million in the prior-year quarter.
Income from commissions, fees and other service charges fell 4.3 percent to $202.2 million from $211.3 million.
Total daily average revenue trades rose 2 percent year-over-year to 194,482. However, net new customer accounts fell to 55,949 from 65,946 in the first quarter of 2008. End-of-period brokerage accounts stood at 2.6 million, up 7 percent from the same time in 2008.
"I am very happy to say that the online customers have stayed very engaged," Layton said in an interview with The Associated Press.
Even so, total customer assets declined during the quarter amid the financial market turmoil. A the end of the period, total customer assets were $110.4 billion, down 34 percent from $168.4 billion a year earlier.
Total delinquent loans jumped 80 percent to $2.24 billion from $1.25 billion.
Layton said the company's home equity loan portfolio showed signs of improvement, but "continued deterioration" in other areas "necessitated further reserve building."
Delinquent home equity loans increased 29 percent, while delinquencies among E-Trade's consumer and other loan portfolios rose 67 percent. Total net chargeoffs, or loans written off as unpaid, were $333.8 million, up from $176.1 million in the 2008 quarter.
E-Trade continued to shrink its bank loan portfolio during the first quarter. Its total loan portfolio has been reduced by about $1 billion from the fourth quarter, of which about $700 million was related to prepayment or scheduled principal reductions, the company said.
