NEW YORK — E*Trade Financial Corp. -- which once advocated a branch-less approach to banking -- plans to open its first small branches this year, a new move for the company.
The 20-branch expansion follows a year in which E*Trade saw record earnings, broader profit margins, higher assets and a stock price that nearly tripled in a year.
E*Trade, which last month moved its headquarters from Menlo Park, Calif., to Manhattan, earned $203 million on revenue of $1.5 billion in 2003, reversing a loss of $186 million on $1.3 billion in 2002.
“We have not adopted branches, and we have been able to grow at a rate far in excess of what is seen in the industry,” said then-E*Trade chief banking officer Mitchell Caplan at an industry trade event in October of 2000, some five months after E*Trade purchased the 8,000-ATM portfolio of the former Card Capture Services. (See related story No bricks, no mortar, no problem)
ATMs are clearly still part of the company's strategy; it purchased the contracts for 4,000 ATMs from Amicus Financial/XtraCash ATM last spring. It has 15,000, making it the largest bank operator of an ATM network. Bank of America is No. 2 with some 12,000 machines. (See related story E*Trade buys XtraCash ATMs)
Yet E*Trade plans to open 20 small branches this year in "strategic" cities, according to the Sacramento Business Journal, which cited company spokesperson Connie Dotson. La Jolla, Calif., and Orlando, Fla., will be among the sites.
The move to branches is an attempt to "get more assets from their clients," said Richard Rapetto, an analyst with Sandler O'Neill & Partners in New York. With a physical site, it is easier to market all of E*Trade's products.
E*Trade had 2.8 million active brokerage accounts at the end of 2003, down 23 percent from 2002, but they held a lot more money -- $24 billion in assets, up 121 percent from $11.3 billion the prior year.
The company had 42,023 bank accounts in 2003, almost flat with 41,911 in 2002 -- but total bank deposits grew to $12.5 billion, up 49 percent from $8.4 billion.
E*Trade got five showplace branches in 2001, when it bought rival Internet brokerage WebStreet -- in New York, San Francisco, Denver, Boston and Beverly Hills.
E*Trade also rolled out Target Zones -- 400-square-foot financial centers featuring ATMs and kiosks that allowed customers to open E*Trade accounts, get market updates and make stock trades at Target stores -- in late 2001 and early 2002.
However, the company closed all 43 Target Zones and the New York branch in 2003's second quarter, as part of a larger cost-cutting effort. E*Trade Centers are still open in San Francisco, Denver, Boston and Los Angeles. (See related story E*Trade closes Target Zones as part of cost-cutting effort)
