E-Trade Financial Corp. has introduced a redesigned Web site meant to promote its nonbrokerage products, which bolster its balance sheet when trading is slow.
Diversification is a central part of the thesis of the New York company’s strategy — online banking and lending to take up the slack when trading slumps, banking and brokerage to even out inconsistencies in the home loan market.
But E-Trade has lost banking customers in the past year.
“The vision always was how to bring this all together,” said chief operating officer R. Jarrett Lilien. “What we’ve been trying to do is naturally blur the lines” so that customers with a bank account, a loan, and a brokerage account know they are doing business with a single company rather than the heritage businesses it cobbled together in years past, Mr. Lilien said.
When customers log on to E-Trade’s site, the first screen they see is now a consolidated view of all their relationships with the company.
That screen also features a prominent ad for a recently introduced $175 incentive to open a checking account with direct deposit. And the navigation banner is more specific, replacing “Lending” with “Mortgages & Home Equity,” for example.
Some products were moved to different parts of the site to reflect customer shopping habits better, said Robert Shenk, E-Trade’s vice president of retail banking, in an interview Wednesday.
“The accounts page is the most powerful page” for communicating with the customer, Mr. Shenk said. “If you come to the old E-Trade site, you may have come there a hundred times and you may have never figured out that we have mortgages and home equity.”
The redesigned site has been available to customers as an option for over a month. Those who switched to the old version were asked to fill out a survey, which along with their clicking habits was used to fine-tune the new one. The option of using the old version ended Tuesday.
On June 30, E-Trade had 627,567 active banking accounts, 7% fewer than a year earlier and 2% fewer than on March 31. Active brokerage accounts totaled 2.9 million, up about 1% from either period.
Trades averaged 127,400 a day in the second quarter, 9% more than a year earlier but 19% less than in the booming first quarter — a typical pattern in the industry this year.
Net brokerage revenue of $228 million was down 13.3% from the first quarter but up 2.4% from a year earlier. Net banking revenue of $381 million was up 11.2% from the first quarter and 4.4% from the 2003 quarter.
E-Trade reported profit of $123 million for the quarter, up 39% from the first quarter and 846% from a year earlier.
The per-share figure was 31 cents, of which 7 cents came from selling its automated teller machine business to Cardtronics LP of Houston. The July 2 sale, which added $31.3 million of income to the balance sheet, helped rescue an otherwise lackluster quarter; total revenue slipped 7.3% from January-March.
The company said a reduction in ad spending also helped maintain growth in net income.
Ongoing operations contributed 20 cents per share to the profit total, of which 10 cents came from brokerage and 10 cents from banking, according to Richard Repetto, an analyst with Sandler O’Neill & Partners LP. Nine cents of the banking figure came from retail and a penny from mortgage lending.
Mitchell H. Caplan, E-Trade’s chief executive, said in a press release that the quarter demonstrated “the ability of our integrated brokerage and bank model to generate superior results in the short term while we continue to build for future growth.”
The results were announced Tuesday after the market closed. Sanders Morris Harris Group Inc., a Houston investment firm, upgraded E-Trade from “buy” to “strong buy,” and on Wednesday its stock rose 4.66%, to $10.78.
Mr. Caplan had recently expressed concern that E-Trade’s brand was not associated with banking products. “It’s still being thought of first around trading,” he said in a speech in June at a New York conference hosted by Forrester Research Inc. of Cambridge, Mass.
On Tuesday, in an earnings conference call, Mr. Caplan said his company’s “unique model delivers earning stability through revenue diversification.” Though trading declined from the first quarter, the company noted that its banking net interest spread improved 11% since the first quarter, to 205 basis points.
Richard Herr, a vice president of equity research at Keefe, Bruyette & Woods Inc., said the banking operation has given E-Trade some earning stability and will provide “a consistent stream of earnings” even when the brokerage end suffers from industrywide trends.
E-Trade is also bringing its brokerage selling points, such as speed, to nontrading products. In March it introduced a two-second speed guarantee for certain trades, surpassing the industry speedsters at the time; in June it brought speed to home equity lending with EquityExpress, which promises that closing papers are mailed out within 24 hours of approval.
During the earnings call, Mr. Lilien also mentioned an upcoming product that “could reduce mortgage closing times to as little as 15 days for qualified customers.”
Alenka Grealish, who manages the banking group at the Boston market research firm Celent Communications LLC, said that the Web redesign is a better strategy to hook new banking customers than the $175 incentive, which is also offered on the site’s home page.
“To just try to motivate people through these cash incentives — well, people just don’t care that much,” Ms. Grealish said. The hassle of learning a new online banking system and setting it up for bill payment and direct deposit may be greater than any dollar amount a company can deliver, she said.
However, she noted, “there’s a fraction of people who really say: ‘Gosh, I really pay a lot of attention to my E-Trade accounts; wouldn’t it be nice to see everything on one statement?’”
This Web site redesign was not E-Trade’s first attempt to remove barriers to customers’ bringing in more money.
In April it integrated Instant Account Verification, a product from Yodlee Inc. of Redwood City, Calif. This accelerates the process of linking accounts between two banks.
Indeed, E-Trade’s Quick Transfer feature, which facilitates transfers from both internal and external bank accounts, sits right beneath the $175 incentive ad on the new accounts view page.
Mr. Shenk said E-Trade encourages the use of outside bank accounts because that enables customers to fund trades faster and because “even the biggest of financial services firms would be deluding themselves to think that they can have every single financial relationship a customer has.”
