E-Trade Ekes Out Small 4Q Profit

Thursday, January 25th 2001, 12:00 am

By: News On 6

SAN FRANCISCO (AP) â€” E-Trade Group said Wednesday that it eked out a profit during last year's final quarter as the online broker persuaded skittish stock market investors to move money into the company's fast-growing Internet bank.

The Menlo Park-based company had a net profit of $1.4 million, or 0 cents per share, in its fiscal first quarter ended Dec. 31, an improvement over a loss of $7.3 million, or 2 cents per share, in the previous year.

Excluding one-time charges, E-Trade said it its quarterly profit from operations totaled $5.8 million, or 2 cents per share, a dramatic improvement from a loss of $38.1 million, or 13 cents per share, in the prior year.

The profit from continuing operations beat the stock market's expectations. The consensus earnings estimate of analysts surveyed by First Call/Thomson Financial was 1 cent per share.

Fourth-quarter revenues rose 22 percent to $334 million, falling below Wall Street's consensus estimate of $350 million.

``All in all, it was a decent quarter, although they came in a little light in some areas of the business,'' said industry analyst Scott Appleby of Robertson Stephens in San Francisco.

E-Trade disclosed its results after the stock market closed Wednesday. In after-hours trading, the company's shares gained 3 cents to $14. The stock increased by 91 cents during regular trading Wednesday on the Nasdaq Stock Market.

The company plans to begin trading its shares on the New York Stock Exchange within the next month and start reporting its financial results on a calendar year basis. E-Trade's fiscal year previously ended Sept. 30.

Like most stock brokers, E-Trade's business suffered during the final three months as online investors spooked by a meltdown in tech stocks grew more cautious about venturing into the market. E-Trade attracted $5.6 billion into customer accounts in the quarter, down 6 percent from the prior quarter and down 7 percent from the prior year.

Trading volumes also remained flat during the quarter, hurting the company's commission revenue. Other online brokers managed an average gain of 5 percent in daily trading activity from the September to December period, Appleby said.

The contraction didn't depress E-Trade's bottom line as much as it did some of its rivals. Charles Schwab Corp., which is far larger than E-Trade, last week reported that its quarterly profits from continuing operations plunged 15 percent.

E-Trade's ace in the hole during the quarter proved to be its Internet bank, which the company acquired for just under $1 billion last January.

In a conference call with investors, E-Trade management credited the Internet bank with helping the company avoid serious erosion in its earnings. E-Trade boosted its bank deposits by $1.1 billion, or 22 percent, between September and January to $5.7 billion.

Many of the new deposits came from E-Trade's brokerage account customers who decided to shift their money into insured accounts, E-Trade CEO Christos Cotsako told analysts.

The bank has become the centerpiece of E-Trade's efforts to create an online financial services supermarket. Earlier this month, E-Trade disclosed plans to buy an online mortgage broker, LoansDirect, to expand its bank products.

E-Trade also is setting up shop in 20 Target stores to woo new customers.

The company plans to spotlight its broader selection of financial services this Sunday during TV commercials that will air during its sponsorship of the Super Bowl halftime show. Cotsako characterized the Super Bowl as the cornerstone of its effort to add more than 1 million new customers during 2001.

E-Trade ended 2000 with 3.6 million brokerage and banking accounts with balances of $52.6 billion, up from 2 million customer accounts with $47.3 billion at the end of 1999.

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On The Net:

http://www.etrade.com