E*Trade shares tumble 11 percent after soft results

E*Trade shares tumble 11 percent after soft results

Stock Market Predictions

(Global Markets) - Shares of E*Trade Financial (ETFC.O) tumbled 10.7 percent after the company reported a surprising loss late on Wednesday, due to higher-than-expected loan provisions in its troubled banking unit and a slowdown in trading levels.

The online brokerage and financial services company's shares tumbled 11.6 percent, or $1.09, to $8.25 in morning trading

E*Trade reported a net loss of $6.3 million, or 2 cents a share in the fourth quarter, compared with a loss of $24 million, or 11 cents, a year earlier.

Analysts on average expected the company to earn 20 cents a share, according to Thomson Global Markets I/B/E/S.

The company said it has been transitioning since the second half of 2011 to a new banking regulator, and to bring its programs in line, it took a $15 million writedown to adjust for loans that were currently in foreclosure, and it added $67 million to its reserves.

In total, E*Trade said it set aside $123 million for loan losses in the quarter, compared with $194 million a year earlier.

David Chiaverini, an analyst at BMO Capital Markets, said he had been expecting the company to record $48 million in loan loss provisions.

E*Trade took billions of dollars in losses on risky loans in the mortgage portfolio of its banking unit following the collapse of the U.S. housing market. It has made progress with its debt and credit issues, chalking up its first full-year profit since 2006, but the loan book continues to drag on earnings.

Separately, the company paid about $11 million in the quarter to settle a class-action lawsuit as a result of losses in its mortgage and home equity loans portfolio in 2007.

Minus the one-time charges, E*Trade would have likely earned just under 17 cents a share, Richard Repetto, an analyst at Sandler O'Neill Research, said in a note to clients.

Daily client trades at the brokerage were down 7 percent from a year ago as investors pulled back from choppy markets. E*Trade also said its net interest margins would fall below its earlier forecasts in 2012 due to the ongoing soft interest rate environment.

While Repetto said he believes E*Trade management "is doing all the right things," he downgraded the stock to "hold" from "buy" due to the difficult trading environment and net interest margin compression.

Goldman Sachs cut E*Trade to "neutral" from "buy," while Macquarie cut its price target for the firm to $8 from $10, and BMO Capital Market cut its price target to $8 from $9.

(Reporting By John McCrank in New York; Editing by Derek Caney and Maureen Bavdek)

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Schwab had net outflow in April

Schwab had net outflow in April

Stock Market Predictions

NEW YORK/SAN FRANCISCO (Global Markets) - Charles Schwab Corp (SCHW.N), the biggest U.S. online brokerage, said on Friday that clients withdrew a net $500 million in April, the first down month since last June, and its stock fell nearly 2 percent on fears the company would not meet its asset-growth goals.

Schwab said customers withdrew the money to pay taxes, and that customer trading activity slowed from a year earlier. A spokesman said April is typically the slowest month for inflows because of tax payments, but the company said the net outflow was its first for the month since 2001.

This April may have been worse than others because taxes were due later in the month, on the 18th -- not the customary April 15 cutoff, spokesman Greg Gable said. Tax payments "had a more dominant effect," he said.

Inflows have returned to "seasonal norms" in May, Gable said, and April's trading activity was little changed from March after several months of rising activity.

Trading activity at Schwab and other online brokers is watched closely since it helps measure the confidence that individual investors have in the stock market. Customer trading had been on the rebound over the past several months.

"Retail customers appear to remain engaged and net new brokerage accounts were the second highest in the past 12 months," analyst Matt Fischer at CLSA Credit Agricole Securities wrote in a note to clients.

Rising markets helped generate $35 billion in market gains for Schwab customers in April. That helped push client assets at the firm up to $1.68 trillion as of April 30, an 11 percent increase from the prior year.

But the outflows brought to $73.8 billion the total net inflows for the first four months of 2011, equal to annualized growth of 4.7 percent -- below the company's 2011 target of 8 to 10 percent growth, Sandler O'Neill analyst Richard Repetto wrote in a note to clients.

"The results were mixed, with negative core net new assets but better-than-expected client trading activity," Fischer, of CLSA Credit Agricole Securities, wrote.

Schwab's daily average client trades for the month fell by 1 percent from a year ago to 435,000. March volumes, by comparison, had jumped 16 percent from the previous year.

The San Francisco company also opened 83,000 new accounts in April, down 7 percent from a year earlier but a 1 percent increase from March.

Schwab said the asset outflow reflected cash payments for U.S. income taxes. "Tax season took a bite out of flows, turning negative for the first time in a decade, though management noted that things likely returned to normal in May," Fischer said.

Schwab, one of the largest sellers of mutual funds, also noted investors yanked a net $3.3 billion from money market funds, while pouring money into taxable bond and "hybrid" stock and bond funds.

Investors last month also pulled $521 million from large company stock funds and $195 million from municipal and other tax-free bond funds.

Schwab's stock fell 32 cents, or 1.8 percent, to $17.66 on the New York Stock Exchange, the second-worst performer on the 11-member NYSE Arca Securities Broker/Dealer Index. Shares of Schwab had risen 5.1 percent this year before Friday's client activity report.

(This story was corrected to show net outflow of $500 million in first sentence)

(Reporting by Joseph A. Giannone and Philipp Gollner; Editing by Matthew Lewis, Gunna Dickson, Gary Hill)

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