E*Trade Posts Second Quarter Profit

E*Trade Financial the online brokerage company has returned to profitability after posting second quarter profits on Wednesday for the first time in three years.

The company has not faired well after its business was negatively impacted by bad loans made by its banking division, which reported its seventh consecutive drop in loan loss provisions.

Net charge-offs, or loans that E*Trade doesn’t think it can collect, were $US225 million ($252m), falling 42 per cent from a year ago.

E*Trade gave its earnings a boost by releasing US$60 million from its loan loss as opposed to adding to it, suggesting that the company now believes it has enough capital to cover any impending losses.

The in improvement in the company’s loan portfolio during the second quarter was the difference between E*Trade reporting a profit rather than a loss.

In an interview with Dow Jones Newswires, E*Trade chief executive Steven Freiberg said: “The most significant dollar change (for the company) has been continued improvement in delinquencies and therefore write-offs and provisions in the legacy loan book.”

Mr. Freiberg took the helm at E*Trade on April 1st, and given the current state of the U.S. economy says the company would probably experience a continued decline into 2011.

A closely followed metric with E*Trade is its daily average revenue trades (DARTs), which it reported as being 170,000, up ten per cent from the first quarter however still 16 per cent below where it was a year earlier. The broker like its rivals benefitted from the “flash crash” on the U.S stock market in May 6.

Mr. Freiberg said, however, that trading in June was “not anywhere near as robust,” adding that the “residual effects of the flash crash have caused more investors to become concerned”.

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