E-Trade Posts Smaller Loss Than Expected

E-Trade Group Inc. on Wednesday reported a smaller-than-expected net loss for its fiscal fourth quarter while notching solid growth in customer accounts.

The second-largest online brokerage firm lost $26.7 million, or 11 cents a share, compared with a loss of $15.2 million, or 8 cents, a year earlier. However, that was better than the 13-cent loss expected by Wall Street analysts.

The Menlo Park, Calif.-based company added a net 310,000 accounts during the quarter ended Sept. 30 at an average cost of $198 per account. That was down from $238 in the third quarter and $424 a year ago.

That’s considered a key figure because analysts are worried that online brokerages are spending so much on advertising that it will take years for new accounts to generate sufficient revenue. By contrast, DLJdirect, which reported earnings Tuesday, spent an average of $724 to acquire each new account last quarter.

The size of the average customer account dropped to about $18,000 from $20,000 in the third quarter as E-Trade signed up customers with fewer assets. Some firms discourage such accounts, saying they’re unprofitable. But E-Trade said those customers will be profitable in the future as their salaries grow.

“Even though their assets may be less now, as they build we’ll build a future with them,” said Christos Cotsakos, E-Trade’s chairman and chief executive.

Despite a general falloff in the industry, the company’s trading activity remained roughly constant with the previous quarter’s level of slightly more than 80,000 trades a day.

Also Wednesday, Knight/Trimark Group, a Wall Street firm that executes many individual-investor trades, said its third-quarter net income rose to 19 cents per share versus 13 cents in the year-ago period, despite a sharp drop in trading volume.

E-Trade shares rose 22 cents to $25.63, while Knight/Trimark fell 75 cents to $24.38, both on Nasdaq.