redbeard20000

E*Trade: A Solid, Deep Value Stock

Heres my take on the current earnings report:

Etrade basically already released most of the relevant info for this
quarter so I'm pretty confident in my expectations of -60 mil in
operating earnings. They could surprise to the upside with sales of
securities, those holdings have had a huge increase this quarter, and if they sold off a bunch this would come out in the earnings report and might push them positive for this quarter. However, thats more of a one-time gain thing and while very nice, doesn't really reflect how well the company is doing.

I'm kinda disapointed with the special mention deliquency rates, they only declined 4% q/q as of the end of August, which is basically the same rate at which their total portfolio declined. Which means people are failing to make payments at the same rate as last quarter. I would hope for more of an improvement in that area, but at least its not getting worse. Overall shrinkage of the loan portfolio is great though, at over 5% per quarter.

They currently have around 6 Billion in cash and equivalents at the
Bank, and management stated they hoped to get that down to around 2 Billion. They have just about 4 Billion in Repos and FHLB advances due by the end of the year so hopfully they dont roll those over and just use the cash to pay them off. This will make their capital ratios look ALOT better, at least the Tier 1 ratio which is what most people make a fuss about. If they do that they'll have equity somewhere a little north of 4 Billion (assuming all the debentures get converted) and slightly more than 40something Billion in assets. Having 6 Billion in cash at the bank doing nothing when they no longer have liquidity problems, is kinda a waste.