E*Trade's CEO on consolidation (2Q05 ET conf call quotes)

E*Trade's (ticker: ET) CEO made an interesting point on his conference call: he said that when investors think about consolidation in the online brokerage and banking sector, they should also consider the possibility that potential acquirers will come from outside the financial services sector. Here's his comment:

…we …not only… have leverage to the upside in the equities market… but we are in a place where when you look at customers you can monetize the relationship with them not only around trading but also around investing in the form of cash because we have a bank balance sheet and also in the form of credit and the deepening of the credit relationship. And so when you think about consolidation, it could occur in the space (and there are synergies associated with consolidation in the space just from taking costs out); but there are also significant synergies because of the uniqueness of our model. When you look in financial services at large, often that's the case as well and even when you look outside of financial services, there is the potential where if you have a deep customer base and it's growing and engaging with customers and they have a need for financial services, there is also an opportunity there. And so ultimately when you look in the marketplace at anybody else's account, it becomes more valuable in our model … I think we will continue to see consolidation within the space and then outside the space.

(Quotes are from the CCBN StreetEvents transcript.)

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