I guess it's all those buybacks and Q1 rebalancing supporting the market???? Comments anyone? E*Trade Says Profit Slows, Cuts Full-Year Forecast (Update1) By Bradley Keoun http://www.bloomberg.com/apps/news?pid=20601087&sid=am5wZ7fDSfYM&refer=home April 18 (Bloomberg) -- E*Trade Financial Corp., the No. 4 discount brokerage, said profit rose 19 percent, the slowest pace in seven quarters, and cut its earnings forecast for this year as customers traded less. First-quarter net income climbed to $169.4 million, or 39 cents a share, from $142.5 million, or 33 cents, a year earlier, the New York-based company said today in a statement. The company is now predicting full-year earnings of $1.55 to $1.75 a share, compared with a forecast of $1.65 to $1.80 in December. Chief Executive Officer Mitch Caplan increased profit 46 percent last year as trading accelerated and E*Trade reaped the benefit of acquisitions made in 2005. Now he's spending more on advertising and customer service as the industry's growth wanes. Rival broker TD Ameritrade Holding Corp. also cited slower trading when cutting its profit forecast earlier this week. ``The retail investor is just not trading as much right now,'' Chief Operating Officer Jarrett Lilien said in an interview. ``We still think it'll be a good year for trading. We're just not as optimistic as when we made our forecast last year.'' The first quarter's results matched the average estimate of eight analysts surveyed by Bloomberg. E*Trade was forecast to earn $1.70 for the full year, according to the Bloomberg survey. Acquisitions The results were issued after the close of trading on the Nasdaq Stock Market. The shares rose 16 cents during regular hours to $22.13, leaving them down 1.3 percent this year, and traded as low as $21.50 after-hours. The company in late 2005 bought rival online brokerages Harrisdirect and BrownCo. The transactions, which cost a combined $2.31 billion, added about 600,000 customers, an 18 percent increase. ``Last year was a dramatic year for them, with the two major acquisitions back-to-back,'' said Roger Lister, chief credit officer for financial institutions at Dominion Bond Rating Service, referring to E*Trade. ``Clearly you're not going to get a repetition of that.'' Revenue climbed 7.8 percent, driven mostly by rising interest collected on trading loans and by reinvesting customers' deposits in higher-earning assets. Advertising costs rose 31 percent to $45.6 million, while compensation and benefits rose by 6.7 percent to $123.8 million. Trading Customers averaged about 170,000 trades per day, about 6 percent fewer than a year earlier. The average was 9 percent higher than in the fourth quarter of last year. The average commission per trade fell to $11.89, from $12.10 a year earlier. Many investors were deterred from placing new stock orders by the stock market's swoon in February, Lilien said. The Standard & Poor's 500 Index dropped 2.2 percent that month, the first decline since May 2006. TD Ameritrade, the No. 3 online broker, said yesterday it handled 253,631 trades per day, about flat with the year-earlier period and 6.8 percent more than in the fourth quarter. No. 1 Charles Schwab Corp. said its customers averaged 265,700 trades per day in the first quarter, 14 percent fewer than a year earlier and 9 percent more than in the fourth quarter. E*Trade's revised full-year guidance reflects an increase of $28 million, or 4 cents a share, in estimated provisions to cover bad loans, Lilien said. While less than 0.2 percent of the company's loan portfolio is tied to the riskiest ``subprime'' borrowers, recent tightening of underwriting standards may lead to more defaults among borrowers with better credit, he said. Subprime Loans Subprime loans are made to borrowers with poor credit ratings or high debt burdens. They typically charge higher interest rates to compensate for the greater risk of default. Late payments on subprime home loans hit a four-year high by the end of 2006, the Mortgage Bankers Association reported. ``It might be harder for you to refinance,'' Lilien said. ``That increased difficulty could lead to a default that never would have happened before.''