RealTime IT News

The Books Get Better for E*TRADE

E*TRADE Group Inc. registered a personal best on Thursday when it reported a net profit of $7.2 million or 2 cents per share in the fourth quarter.

That comes in stark contrast to its net loss of $33.4 million, or 12 cents per share, in the previous year. Overall, the year 2000 was a banner one as the firm saw profitability in all four quarters and recorded annual net revenues of $1.4 billion. The operating results beat Wall Street's lowered expectations calling for the brokerage to break even with zero cents per share.

Analysts have cut their profit forecasts for Web brokers because of a decline in the Nasdaq stock market and an estimated 10 percent drop in share trading volumes during the quarter.

Indeed, E*TRADE succeeded despite such adverse market conditions, which effected rivals Charles Schwab Corp. and DLJdirect. The total profit for the fourth quarter of fiscal 2000 was $47.7 million, or 15 cents per share on a fully diluted basis.

E*TRADE also added 337,000 net new brokerage and banking accounts during Q4, bringing its total active accounts to more than 3.3 million, approximately double that of 1.7 million accounts a year ago. New additions for the quarter include 77,500 accounts gained from E*TRADE's agreement with Wit Capital to acquire its brokerage accounts.

Christos M. Cotsakos, chairman of the board and chief executive officer of E*TRADE Group, attributed much of the success to his firm's securities business unit, in combination with its banking, institutional and corporate services business units.

During Q4, E*TRADE continued its expansion into a diversified financial services company and created an innovative, low-cost alternative to "bricks-and-mortar," for the individual investor.

Other highlights for the firm include its acquisition of Private Accounts.com, enabling customers access to the expertise and experience of professional money managers, completion of a joint venture with Ernst & Young to create eAdvisor, a new entity that provides consumers with financial planning services both online and in person.

Despite such glowing financials, the light does not always shine on the land of E*TRADE. Negative shadows have been cast in the past year and the company has been forced to fork over cash for numerous fines for various violations. In August, the National Association of Securities Dealers fined the online broker $20,000 for failing to report its short interest positions for more than two years.

That penalty was the second time within a four-month period, that the NASD fined E*Trade Securities, which was censured and fined $20,000 in May for failing to respond to requests for information related to customer complaints. Also in August, the firm reported that regulators have been investigating the firm's marketing practices, forcing it to get advance approval of all advertising materials. This comes after a year in which the government and rivals have criticized the company repeatedly for implying that online traders quickly strike it rich.

In August of 1999, E*Trade was ordered to pay a customer more than $61,000 plus interest and costs as a result of a mishandled order.