By Ed Charles
It’s been a frantic start to the year for the number three online broking company Etrade Australia, a firm in which ANZ Bank owns a 34 per cent stake.
Unusual trades and a sliding share price culminated in the early publication yesterday of unaudited highlights from the group’s financial statements.
Etrade said it recorded a net profit of $8.8 million for the half year ended December 2005 – a 20 per cent increase from the $7.35 million reported for same period in 2004.
On 3 January Etrade CEO Brett Spork was forced to respond to an ASX letter asking why the company’s share price dropped from a high of $2.57 to $2.12 after a flurry of trading. The share price has since recovered to $2.30.
The fall was caused by an independent researcher writing a negative note about the company claiming the company was about to take an $18 million hit from the ATO relating to marketing expenses and the value of $60 million worth of shares issued to ANZ.
Etrade informed the market about the potential liability twice last year and has no knowledge of an unfavourable ruling being on the horizon. Because of this speculation, the company released its results early and expects to have audited results available by the third week in February.
Etrade said online financial services revenue increased by 15 per cent to $23.3 million while customer assets under administration were up 26 per cent at over $11 billion. Customer accounts increased by 12.6 per cent to 215,000.
Etrade handles ANZ’s online broking. The bank’s shareholding in Etrade reflects the proportion of its business coming from the bank.
Etrade and competitor IWL are also at the centre of persistent speculation over further consolidation of the online trading market bringing the two together.
IWL handles the online trading for National and Westpac while Commonwealth Bank’s CommSec division, which is the market leader with nearly half of the online trading market, handles its own operations in house.
Any deal between IWL and Etrade would see the combined entity handling the online broking for three of the four pillars of banking.
Spork said he didn’t comment on the rumours, which have been circulating for some time. He said that the company’s focus was on aggressively selling its “platform” to other financial services companies.
Online broking is competitive but is also seeing spectacular growth. According to statistics from the ASX, the number of trades increased by 34 per cent to 25.03 million in 2005 from 18.66 million in 2004. Turnover increased 25 per cent from $708.9 billion to $886.5 billion in the same period.
Etrade’s transactions increased by 26 per cent from 1.56 million executions in 2004 to 1.97 million executions in 2005. In the last six months of 2005 Etrade executed 1.14 million transactions.