Seeking Alpha

E*Trade boosted to Buy at Compass Point following earnings

  • DARTs of 160K in Q4 gained 10% from Q3 and 25% from a year ago.
  • Net operating interest income of $257M vs. $241M in Q3 and $260M a year ago, with net interest spread of 2.4% up 10 basis points from Q3.
  • The loan portfolio of $8.6B compares to $10.6B a year ago. Provisions of $17M are down from $37M in Q3.
  • Strong core brokerage activity and lower provisions have Compass Point upgrading to Buy with $25 price target. "We see further upside as the company appears to have finally shifted from playing defense to offense, taking advantage of an improving retail environment and housing market."
  • "Unlike its other broker peers, the company can meaningfully improve EPS without another leg up in interest rates as its newfound capital flexibility should permit accretive debt paydown in late 2014. Longer term, we believe E*Trade remains a takeout candidate given its strong brokerage franchise and as its legacy loan portfolio continues to shrink."
  • Shares +0.3%
  • Earnings press release, initial report
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