E*TRADE Financial Corporation (ETFC)
Q3 2010 Earnings Conference Call
October 20, 2010 5:00 p.m. ET

Executives

Susan Hickey – Financial Media Relations
Steven J. Freiberg – Chief Executive Officer
Bruce P. Nolop – Executive Vice President and Chief Financial Officer
Paul Brandow – Chief Risk Officer
Robert V. Burton – Executive Vice President and President of E*TRADE Bank
Michael J. Curcio – Executive Vice President and President of E*TRADE Securities

Analysts

Daniel Harris – Goldman Sachs
Richard Repetto – Sandler O’Neill
Eric Bertrand – Barclays Capital
Howard Chen – Credit Suisse
Michael Carrier – Deutsche Bank
Michael Vinciquerra – BMO Capital Markets
Matthew Snowling – FBR Capital Markets
Faye Elliot – Bank of America/Merrill Lynch
Patrick O''Shaughnessy – Raymond James
Brennan Hawken – Collins Stewart
Joel Jeffrey – KBW

Presentation

Operator

Welcome to the E*TRADE Financial Third Quarter 2010 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode. Following the formal remarks, we will open the call for Q&A. At that time, if you have a question, please press star one on your touchtone phone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Thank you. It is now my pleasure to turn the floor over to Susan Hickey from E*TRADE Financial. Please go ahead.

Susan Hickey

Thank you. Good afternoon and thank you for joining us for E*TRADE Financial''s third quarter 2010 conference call. Joining me today are Steve Freiberg, E*TRADE''s Chief Executive Officer, Bruce Nolop, our Chief Financial Officer, and other members of E*TRADE''s management team.

Before turning the call over to Steve, I’d like to remind everyone that during this conference call, the company will be sharing with you certain projections or other forward-looking statements regarding future events or its future performance. E*TRADE Financial cautions you that certain factors, including risks and uncertainties referred to in the 10-Ks, 10-Qs and other documents E*TRADE files with the Securities and Exchange Commission could cause the company''s actual results to differ materially from those indicated by its projections or forward-looking statements. This call will present information as of October 20, 2010.

Please note that E*TRADE Financial disclaims any duty to update any forward-looking statements made in the presentation. During this call, E*TRADE Financial may also discuss some non-GAAP financial measures in talking about its performance. These measures will be reconciled to GAAP either during the course of this call or in the company''s press release, which can be found on its website at investor.etrade.com.

This call is being recorded. A replay of this call will be available via phone, webcast and podcast beginning this evening at approximately 7 p.m. The call is being webcast live at investor.etrade.com. No other recordings or copies of this call are authorized or may be relied upon. And with that, I will now turn the call over to Steve Freiberg.

Steven J. Freiberg

Thank you everyone for joining us today. To begin this afternoon''s call, I will cover highlights from the third quarter and then Bruce will take you through the results. From there, I will share some thoughts on the opportunities we see for the business after which we will be happy to take your questions.

The third quarter was an important one for E*TRADE as we delivered our second consecutive quarterly profit. We reported pretax income of $36 million and achieved positive net income for the quarter despite an unusually high reported tax rate. Strength in a number of areas supported our performance in a quarter that was notable for the industrywide decline in trading activity and a challenging interest rate environment.

We were pleased with the growth in net new assets and average margin receivables and with the quality of new accounts in the brokerage business. Improvement in loan performance trends drove the eighth consecutive quarterly decline in our loan loss provision.

Effective balance sheet strategies resulted in solid net interest income. And we benefited from opportunistic gains in our securities portfolio. Our results demonstrated progress in positioning the company for sustainable profitability and growth as we continued to execute on a number of key objectives.

Our provision for loan losses has been below charge-offs for five consecutive quarters. We have generated organic bank regulatory capital each quarter this year and we have delivered our second consecutive profitable quarter.

During the quarter, we executed on a number of initiatives to expand our offering to both active traders and long-term investors. In June, we released application programming interface or API, allowing third-party vendors and independent software developers to interface seamlessly with our investing platform.