Some analysts on Thursday scaled back their 2011 earnings forecasts for E-Trade Financial Corp. , citing slow improvement in loan losses, higher taxes and their opinion that E-Trade will have trouble generating substantial revenue in the short term due to weak stock trading.
E-Trade on Wednesday posted its second straight quarterly profit since 2007 as improvement in its loan portfolios offset declining revenue and a drop in trading by brokerage clients. Credit losses from soured mortgage loans had left the New York-based company consistently ending up in the red.
Profit was in line with expectations, but the company said revenue fell nearly 15 percent as reduced stock volatility contributed to a 30 percent decline in trading volume compared with the same quarter a year ago. Trading activity has decreased industrywide in recent months as stock price volatility has eased.
Keefe, Bruyette & Woods analyst Joel Jeffrey noted that the $152 million that the company set aside in the third quarter to cover bad debt was less than he had expected. FBR Capital Markets analyst Matt Snowling said in a research note that he expects credit will continue to improve going forward, but slowly because the housing market is deteriorating.
Jeffrey reduced his 2011 net income estimate to 58 cents per share from 74 cents per share, while Snowling cut his forecast to 50 cents per share from 67 cents per share.
E-Trade shares were down 64 cents, or 4.3 percent, to $14.11.