E-Trade Financial’s (ETFC) shares plummeted Friday after the company reported a $28.6 million loss for the third quarter as its provision for loan loss rose and revenue declined.
The loss, which totaled 10 cents per share, compared with a profit of $40 million in the second quarter and $71 million a year earlier, E-Trade said Thursday.
The company’s provision for loan losses totaled $141 million, up more than 43% from a year earlier. This included roughly $50 million related to loan chargeoffs associated with newly identified bankruptcy filings. A third-party servicer had failed to previously report all bankruptcy data to the company, E-Trade said. The additional chargeoffs were not related to
The company’s shares were trading at $8.64 Friday midday, down more than 8% from Thursday’s closing.
The $50.4 billion-asset company also recorded a $50.6 million loss from the early termination of $520 million in wholesale borrowings as it remains focused on deleveraging its balance sheet. Total operating expenses were $289 million, down 15% from a year earlier. This included $13 million in severance for E-Trade’s former chief executive, Steven J. Freiberg, who was abruptly replaced in August with chairman Frank Petrilli on an interim basis.
Revenue declined more than 3%, to $490 million, from a year earlier. Commissions fell roughly 20%, to $90.4 million, while principal transactions slid almost 19%, to $22.2 million year over year.
The company’s loan portfolio ended the quarter at $11.1 billion, down 5% from the second quarter, primarily related to $458 million of paydowns.
E-Trade is looking to cut costs by $100 million by the end of 2013, Petrilli said in a news release. This projection doubles the previous guidance of $50 million in annual costing savings, Sandler O’Neill & Partners wrote in a company note. The company has already identified $70 million of the cost savings and expects to have the majority in place by the third quarter of next year, the note said.
