E*Trade Financial CorporationETFC

Morningstar Rating

Stock Research and Analysis

by Jason Ren

E*Trade aggressively built out its banking operations to obtain greater yields. Burned badly by the housing downturn, the firm is now running off its loan book in favor of returning to its core competency, its discount brokerage. This is a sound goal. Read more

Bulls Say

Thus far, E*Trade's retail brokerage has done well, maintaining decent account growth and garnering high daily average revenue trades through much of the downturn.

E*Trade's investment book has a negligible amount of exposure to commercial loans and commercial real estate loans, which should help limit loan losses going forward. Read more

Bears Say

E*Trade's average commission per trade has dropped more steeply than its peers', indicating a loss of pricing power.

Citadel, E*Trade's largest debtholder and equityholder, exerts a considerable amount of influence over the brokerage's future through its restrictive loan covenants and its position on the board.

E*Trade does not pay a cash dividend.

The convertible debt's conversion price of around a dollar per share entails sizable dilution if one uses a best-case scenario to value the company. Read more

Strategy

E*Trade is focusing on expanding its discount brokerage while reducing its bank's balance sheet, the source of company's high risk profile. The company is also seeking to build liquidity and capital Read more

Management

Our Stewardship Grade for E*Trade remains an F as we await notice of new leadership. Donald H. Layton will step down from the CEO and chairman positions at the end of the year, after having helmed E*Trade since late 2007. Admittedly, he has taken the Read more

Profile

E*Trade is an online discount brokerage and bank with headquarters in New York. It offers sweep, checking, and savings products to its brokerage clients. The company has Read more

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