Karl Roessner - image
Karl A. Roessner
Chief Executive Officer


This past year was a pivotal one for E*TRADE. I am tremendously proud to be leading a talented, synchronized, and reinvigorated team, intensely focused on recapturing our place as a market leader, growing our business, and continuing to deliver value to you. Following years of attending to the Company’s regulatory and capital initiatives, this year we were presented with an opportunity to pivot firmly toward growth, provided we realign ourselves to seize it. In response, we took action: Restructuring the leadership and clearly defining the growth targets for the Company. Together, we installed a structure and an agenda that appropriately shifted our focus from defense, resulting from past issues, to offense, moving forward to grow our business. And now it’s full speed ahead.


In conjunction with this charge, I moved into the CEO role in September. My first order of business was to revive the E*TRADE that I came to know and love over the many years I have spent here—the scrappy, innovative Company that led this industry forward. While we were once the undisputed leader in the active trader segment, we had lost ground over the past several years. Fortunately, as I took the helm we had just completed the acquisition of OptionsHouse—the #1-rated(1) retail options platform, which brings with it a fantastic and coveted set of capabilities, customers, and colleagues.

Upon completion of the transaction, I installed a strong and experienced leadership team to propel our business, and together we redefined our mission and vision as a Company. Our mission is to enhance the financial independence of traders and investors through a powerful digital offering and professional guidance. Our vision is to be the #1 digital broker and advisor to traders and investors—known for our ease of use and the completeness of our offering.

How will we measure our success? To begin, we set tangible growth goals and instilled an accompanying sense of urgency to achieve them by the latter part of 2018. Specifically, we aim to improve our asset and account growth rates by 200 to 300 basis points, shift the mix of our trades to be 35 percent in derivatives (compared to around 30 percent at year-end 2016), and grow our managed assets to $6 billion (from nearly $4 billion).

These goals demonstrate our sincere commitment to significantly raising the bar in the performance of our core business. We take this commitment seriously and we operate with a sense of accountability throughout our entire organization. Together, we are all accountable to deliver.


There are three key areas of near-term focus that will drive us toward this achievement:

  1. Completing and fully capitalizing on the integration of OptionsHouse;
  2. Tending to our shortcomings that result in customer pain points; and
  3. Revitalizing our brand and customer perception through marketing.

First, we acquired the #1-rated(1) retail options platform in the industry to elevate our offering to once again rival the best in the industry. We will deliver superior active trading capabilities to our customer base, incorporating the best of what the combined E*TRADE/OptionsHouse platforms offer. Supplying an exceptional digital experience has always been part of our DNA and the integration affords us a unique moment in time to ensure that our entire digital offering captivates our customers.

Next, we will revisit the issues that result in pain points for our customers to ensure that once a trader or investor chooses E*TRADE, they rarely have any reason to leave. We do a very good job as a Company with respect to customer service, and over the years we've certainly been a contender on the functionality front. But in today's age of true customer-centricity and exceptionally simple technology, it is incumbent upon us to not only keep up with offerings available through the broad digital marketplace, but to lead it in the sectors we should own. That is an aspirational goal, but in the most tangible sense, we must begin by closing gaps and tightening up the entire customer journey to ensure it is as seamless and as delightful as possible. Lastly on the service front, we must take a good offering, and make it great.

Finally, we must significantly enhance how we project exactly who we are, and convey a compelling value proposition, including all of what E*TRADE has to offer. We need to revitalize the brand and increase awareness and understanding of our offerings. Our offerings must resonate with customers and prospects. We enjoy phenomenal brand awareness, but I'm not certain the trading and investing world still knows exactly why they should come to E*TRADE. A critical pillar of our success is clearly stating this rationale for investors and traders to hear, and doing so in a persuasive and differentiated way. We are avidly working to move the needle on our brand identity, starting with a relaunch this year. We are also working diligently to develop a unified message across all communication channels with our customers, and I am excited for them to experience the changes that lie ahead.


Some of our most pronounced accomplishments in 2016 were on the capital front, where we gained flexibility, generated meaningful amounts of capital, and put it to work for shareholders. Kicking off the year, we lowered the bank’s target Tier 1 leverage ratio by 100 basis points, reflective of our financial strength, improved regulatory position and reduced risk profile. Coupled with strong earnings, this enabled us to move more than $850 million of capital to the parent, which we deployed via multiple avenues:

  • In the first half of the year we seized opportunities amidst dislocations in the market to accelerate our share repurchase program and bought in more than $450 million worth of our shares;
  • We grew our balance sheet to nearly $50 billion, positioning ourselves to move beyond that threshold in earnest this year; and
  • Towards the end of the year we acquired OptionsHouse—an accretive transaction that also marks our first major transaction in more than a decade.

In addition to capital deployment, we delivered a commitment to you to be responsive to the revenue environment—shifting our investment philosophy to an operating margin framework.

Meanwhile, legacy risks continued to diminish as we managed through the last major credit risk overhang on the legacy loan portfolio. By year-end, we had successfully managed the HELOC portion of the portfolio through 85% of the conversions from interest-only to fully amortizing. The performance significantly outperformed our expectations, providing a benefit to our financial results this year through the provision line.

In all, these actions and developments put us in a place where we took a long, hard look at our Company and determined that, as a financially strong institution, it was time to stop looking behind us and focus on the road ahead.


We recognize that much of the financial progress E*TRADE achieved over the past several years stems from the disciplined execution of our multi-year capital plan and stewardship of our shareholders’ capital.That is a discipline that will be unwavering under my leadership as we continue to focus on opportunities to drive meaningful value through prudent stewardship of our shareholders’ capital.

At the forefront of capital deployment is growing our balance sheet. In mid-2016 we arrived at a point where the returns justified crossing $50 billion. We began to prepare for this event, addressing systems and structure to meet the heightened regulatory expectations of larger institutions. In the meantime, all factors affecting the return equation on this initiative have moved in our favor. The amount of available customer deposits has more than doubled, the interest rate environment has improved dramatically, and the associated implementation costs have lessened—all of which serve to enhance the expected returns. We officially crossed the $50 billion threshold in January 2017 and we plan to exceed $62 billion by year-end.

We also intend to resume share repurchases in the second half of this year, while simultaneously pursuing balance sheet growth. Importantly, both balance sheet growth and share repurchases afford us the flexibility to pursue additional strategies including inorganic growth, provided that the returns justify it. Needless to say, the fact that we are able to consider such a robust spectrum of capital deployment strategies is a testament to our strength that grows from our financial and capital discipline.


In closing, I want to reiterate how good I feel about what is in motion at E*TRADE. We are in the midst of a critical and transformative time. We will not lose sight of what we need to do for our customers and for you as our owners. Our team comprises passionate and highly skilled individuals with a shared enthusiasm for success. We are an aligned organization with definitive goals and a plan to achieve them. I am confident in the road map we set forth, and look forward to an exciting and eventful year for E*TRADE


Karl A. Roessner


Forward-Looking Statements

The statements contained in this report that are forward looking, including statements regarding: the continued improvement of the Company’s risk profile; the ability of the Company to meaningfully grow its business; the Company’s market position goals; the utilization of excess capital for balance sheet growth, share repurchases and inorganic growth; the Company’s plans to integrate OptionsHouse, offer competitive and innovative products, and build its brand and customer perception; and the Company’s planned balance sheet size and timing, are “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, and are subject to a number of uncertainties and risks. Actual results may differ materially from those indicated in the forward-looking statements. The uncertainties and risks include, but are not limited to, macro trends of the economy in general, including in interest rates, the residential real estate market and other financial markets, instability in the consumer credit markets and credit trends, increased mortgage loan delinquency and default rates, portfolio growth, portfolio seasoning and resolution through collections, sales or charge-offs, the uncertainty surrounding the foreclosure process, the Company’s ability to continue to compete effectively and execute its business plans, the effectiveness of the Company’s marketing, and the potential negative regulatory consequences resulting from the implementation of financial regulatory reform as well as from actions by or more restrictive policies or interpretations of the Federal Reserve and the Office of the Comptroller of the Currency or other regulators. Further information about these risks and uncertainties can be found in the annual, quarterly, and current reports on Form 10-K, Form 10-Q, and Form 8-K previously filed by E*TRADE Financial Corporation with the Securities and Exchange Commission (including information in these reports under the caption “Risk Factors”). Any forward-looking statement included in this report speaks only as of the date of this communication; the Company disclaims any obligation to update any information.


(1) The OptionsHouse platform was rated "Best for Options Traders” in the Baron’s 2015, 2014, 2013, and 2012 annual reviews. Barron's is a registered trademark of Dow Jones & Co.

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