Current Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934


Date of Report (Date of earliest reported)		April 16, 2004


E*TRADE Financial Corporation (Exact name of registrant as specified in its chapter)

Delaware (State or other jurisdiction of incorporation)	1-11921 (Commission File Number)	94-2844166 (IRS Employer Identification No.)

135 East 57 ^th Street, New York, New York (Address of principal executive offices)		10022 (Zip Code)


Registrant’s telephone number, including area code		646-521-4300

(Former name or former address, if changed since last report)

ITEM 9: REGULATION FD DISCLOSURE

ITEM 12: RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The following information is furnished pursuant to Item 9, “Regulation FD Disclosure” and Item 12, “Results of Operations and Financial Condition.”

On April 16, 2004, the Company announced its first-quarter earnings for fiscal year 2004. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.

The information furnished shall not be deemed “filed “ for purposes of Section 18 of the Securities Exchange Act of 1934, or incorporated by reference into any filing thereunder or under the Securities Act of 1933 unless expressly set forth by specific reference in such filing.

Exhibit Index

99.1 Earnings Press Release, dated April 16, 2004

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Date: April 16, 2004	*ETRADE Financial Corporation**

	By:	/s/ Russell S. Elmer
		Russell S. Elmer
		Corporate Secretary

Exhibit 99.1

FOR IMMEDIATE RELEASE

E*TRADE FINANCIAL Media Contact

Pam Erickson

E*TRADE FINANCIAL Corporation

617-296-6080

pam.erickson@etrade.com

E*TRADE FINANCIAL Investor Relations Contact

Adam Townsend

E*TRADE FINANCIAL Corporation

916-463-2889

adam.townsend@etrade.com

E*TRADE FINANCIAL CORPORATION REPORTS STRONG FIRST

QUARTER RESULTS AND RAISES EARNINGS GUIDANCE

•

Reported first quarter GAAP earnings of $0.23 per share on net income of $88 million

•

Increased both Total and Retail Daily Average Revenue Trades by 12 percent over the fourth quarter results, to 157,000 and 103,000 respectively

•

Increased margin debt by 22 percent to $2.1 billion at quarter end, compared to $1.8 billion at the end of the fourth quarter

•

Improved bank spread to 185 basis points from 169 basis points in the fourth quarter, and exited the quarter at 201 basis points

•

Repurchased $50 million of common stock at a weighted average price of $13.31

•

Added 37,000 net new accounts

•

Raised 2004 Earnings Guidance to between $0.75 and $0.90 per share

New York, April 16, 2004 – E*TRADE FINANCIAL Corporation (NYSE: ET) today announced results for its first quarter ended March 31, 2004, reporting GAAP net income of $88 million, or $0.23 per diluted share, compared to GAAP net income of $21 million, or $0.06 per share, in the same quarter a year ago. Net revenues for the quarter ended March 31, 2004, increased 28 percent over the year ago period to $411 million.

The Company increased its 2004 GAAP earnings guidance to between $0.75 and $0.90 per share from a previous range of between $0.70 and $0.85 per share.

“Our focus on integrating brokerage and banking products to enhance the customer experience is delivering superior value to both our customers and shareholders in 2004,” said Mitchell H. Caplan, Chief Executive Officer, E*TRADE FINANCIAL Corporation. “First quarter momentum is a solid indicator of the increased opportunities created by our integrated model.”

Other selected highlights from the first quarter of 2004:

•

Retail investor activity increased for the fourth consecutive quarter generating higher DARTs and margin debt balances. Total DARTs for the quarter were 157,000, a 12 percent sequential increase and an 81 percent increase year-over-year.

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2004

Page 2

•

Average commission per trade increased to $11.53 from $11.18 in the prior quarter based on strength in main street customer activity, a higher volume of option trades and a favorable mix of international transactions.

•

Exited the quarter at 201 basis points in net interest spread, achieving target a full quarter ahead of plan.

•

Total customer assets increased to $87.2 billion from $83.3 billion in the fourth quarter.

•

Cash and equivalents for the quarter totaled $847 million and free cash totaled $705 million.

•

E*TRADE Securities launched the industry’s first 2-second execution guarantee on S&P 500 stocks.

•

E*TRADE Securities received a four-and-a-half star rating from Barron’s with top honors among active trader platforms.

•

E*TRADE FINANCIAL included in Standard & Poor’s flagship stock index, the S&P 500.

“E*TRADE FINANCIAL is ahead of plan, delivering positive growth from our core brokerage and bank earnings drivers,” said R. Jarrett Lilien, President and Chief Operating Officer, E*TRADE FINANCIAL Corporation. “The steady rise in quarterly trading activity and continued growth in margin debt, along with our ability to generate bank net interest spread in excess of 200 basis points as we exited the first quarter, gives us the confidence to raise 2004 guidance.”

“We continue to set the standard for innovative products and services that meet the needs of the individual investor,” continued Mr. Lilien. “We remain focused on leveraging technology and cost-efficiency to create value for our customers and exceptional results for our shareholders.”

Historical monthly metric data from January 2003 to March 2004 can be found on the E*TRADE FINANCIAL investor relations site at www.etrade.com.

About E*TRADE FINANCIAL

The E*TRADE FINANCIAL family of companies provide financial services including brokerage, banking and lending for retail, corporate and institutional customers. Securities products and services are offered by E*TRADE Securities LLC (Member NASD/SIPC). Bank and lending products and services are offered by E*TRADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries.

# # #

Important Notice

E*TRADE FINANCIAL and the E*TRADE FINANCIAL logo is a registered trademark or trademark of E*TRADE FINANCIAL Corporation. The statements contained in this news release that are forward-looking are based on current expectations that are subject to a number of uncertainties and risks, and actual results may differ materially. The uncertainties and risks include, but are not limited to, changes in market activity, anticipated increases in the rate of new customer acquisition, the conversion of new visitors to the site to customers, the activity of customers and assets held at the institution, seasonality, the development and enhancement of products and services, competitive pressures (including price competition), system failures, economic and political conditions, changes in consumer behavior and the introduction of competing products having technological and/or other advantages. Further information about these risks and uncertainties can be found in the information included in the annual reports previously filed by E*TRADE Group, Inc. or E*TRADE FINANCIAL Corporation with the SEC on Form 10-K (including information under the caption “Risk Factors”) and quarterly reports on Form 10-Q.

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2004

Page
3

Financial Statements

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share amounts)

(Unaudited)


	Three Months Ended March 31,
	2004			2003
Brokerage revenues:
Commissions	$	112,230		$	60,888
Principal transactions		69,429			42,210
Other brokerage-related revenues		43,157			41,896
Brokerage interest income		41,253			34,320
Brokerage interest expense		(3,120	)		(2,513	)

Net brokerage revenues		262,949			176,801
Banking revenues:
Gain on sales of originated loans		27,100			56,395
Gain on sales of loans held-for-sale and securities, net		14,062			15,215
Other banking-related revenues		19,019			18,039
Banking interest income		214,384			187,386
Banking interest expense		(117,606	)		(121,333	)
Provision for loan losses		(9,055	)		(10,333	)

Net banking revenues		147,904			145,369

Total net revenues		410,853			322,170

Expenses excluding interest:
Compensation and benefits		99,978			92,679
Occupancy and equipment		20,657			23,389
Communications		19,457			21,341
Professional services		14,552			10,386
Commissions, clearing and floor brokerage		43,927			30,142
Advertising and market development		24,140			16,593
Servicing and other banking expenses		15,871			16,333
Fair value adjustments of financial derivatives		274			6,815
Depreciation and amortization		21,857			26,748
Amortization of intangibles		8,533			4,938
Restructuring and other exit charges		(995	)		2,542
Acquisition-related expenses		62			1,307
Other		25,468			23,425

Total expenses excluding interest		293,781			276,638

Income before other corporate items		117,072			45,532
Other income (loss):
Corporate interest income		1,385			1,610
Corporate interest expense		(11,338	)		(11,433	)
Gain (loss) on sale and impairment of investments		28,526			(623	)
Equity in income (losses) of investments and venture funds		2,673			2,830

Total other income (loss)		21,246			(7,616	)

Pre-tax income		138,318			37,916
Income tax expense		49,103			15,926
Minority interest in subsidiaries		740			508

Net income	$	88,475		$	21,482

Net income per share:
Basic	$	0.24		$	0.06

Diluted (1)	$	0.23		$	0.06

Shares used in computation of per share data:
Basic		365,045			354,563
Diluted (1)		425,155			358,441

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2004

Page
4

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share amounts)

(Unaudited)


	Three Months Ended
	March 31, 2004			December 31, 2003			March 31, 2003
Brokerage revenues:
Commissions	$	112,230		$	97,915		$	60,888
Principal transactions		69,429			64,822			42,210
Other brokerage-related revenues		43,157			44,232			41,896
Brokerage interest income		41,253			38,308			34,320
Brokerage interest expense		(3,120	)		(3,473	)		(2,513	)

Net brokerage revenues		262,949			241,804			176,801
Banking revenues:
Gain on sales of originated loans		27,100			20,739			56,395
Gain on sales of loans held-for-sale and securities, net		14,062			28,287			15,215
Other banking-related revenues		19,019			20,350			18,039
Banking interest income		214,384			202,996			187,386
Banking interest expense		(117,606	)		(119,056	)		(121,333	)
Provision for loan losses		(9,055	)		(12,374	)		(10,333	)

Net banking revenues		147,904			140,942			145,369

Total net revenues		410,853			382,746			322,170

Expenses excluding interest:
Compensation and benefits		99,978			99,407			92,679
Occupancy and equipment		20,657			20,696			23,389
Communications		19,457			21,613			21,341
Professional services		14,552			14,469			10,386
Commissions, clearing and floor brokerage		43,927			41,197			30,142
Advertising and market development		24,140			11,620			16,593
Servicing and other banking expenses		15,871			16,194			16,333
Fair value adjustments of financial derivatives		274			(398	)		6,815
Depreciation and amortization		21,857			21,916			26,748
Amortization of intangibles		8,533			11,393			4,938
Restructuring and other exit charges		(995	)		8,855			2,542
Acquisition-related expenses		62			(997	)		1,307
Other		25,468			21,950			23,425

Total expenses excluding interest		293,781			287,915			276,638

Income before other corporate items		117,072			94,831			45,532
Other income (loss):
Corporate interest income		1,385			1,572			1,610
Corporate interest expense		(11,338	)		(11,319	)		(11,433	)
Gain (loss) on sale and impairment of investments		28,526			85,326			(623	)
Equity in income (losses) of investments and venture funds		2,673			3,350			2,830

Total other income (loss)		21,246			78,929			(7,616	)

Pre-tax income		138,318			173,760			37,916
Income tax expense		49,103			66,277			15,926
Minority interest in subsidiaries		740			28			508

Net income	$	88,475		$	107,455		$	21,482

Net income per share:
Basic	$	0.24		$	0.30		$	0.06

Diluted (1)	$	0.23		$	0.27		$	0.06

Shares used in computation of per share data:
Basic		365,045			362,944			354,563
Diluted (1)		425,155			421,121			358,441

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2004

Page
5

E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(dollars in thousands)

(Unaudited)


	March 31, 2004			December 31, 2003
ASSETS
Cash and equivalents	$	846,855		$	921,439
Cash and investments required to be segregated under Federal or other regulations		1,263,813			1,644,605
Brokerage receivables, net		3,719,111			2,297,778
Trading securities		817,299			832,889
Available-for-sale mortgage-backed and investment securities		10,078,971			9,826,940
Other investments		48,081			49,306
Loans receivable, net		8,311,301			8,130,906
Loans held-for-sale, net		400,101			1,000,487
Property and equipment, net		302,420			301,258
Goodwill		403,006			402,496
Other intangibles, net		135,446			143,990
Other assets		584,232			497,122

Total assets	$	26,910,636		$	26,049,216

LIABILITIES AND SHAREHOLDERS' EQUITY
Brokerage payables	$	4,711,905		$	3,691,176
Deposits		11,975,689			12,514,486
Securities sold under agreements to repurchase		5,607,065			5,283,609
Other borrowings by Bank subsidiary		1,166,742			1,203,554
Accounts payable, accrued and other liabilities		778,298			742,767
Convertible subordinated notes		695,330			695,330

Total liabilities		24,935,029			24,130,922

Shareholders’ equity:
Preferred stock, shares authorized: 1,000,000; issued and outstanding: none at March 31, 2004 and December 31, 2003		—			—
Shares exchangeable into common stock, $.01 par value, shares authorized: 10,644,223; issued and outstanding: 1,326,125 at March 31, 2004 and 1,386,125 at December 31, 2003		13			14
Common stock, $.01 par value, shares authorized: 600,000,000; issued and outstanding: 367,267,118 at March 31, 2004 and 366,636,406 at December 31, 2003		3,673			3,666
Additional paid-in-capital		2,229,190			2,247,930
Deferred stock compensation		(13,207	)		(12,874	)
Accumulated deficit		(141,990	)		(230,465	)
Accumulated other comprehensive loss		(102,072	)		(89,977	)

Total shareholders’ equity		1,975,607			1,918,294

Total liabilities and shareholders’ equity	$	26,910,636		$	26,049,216

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2004

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6

Segment Reporting


	Three Months Ended March 31, 2004
	Brokerage			Banking			Elimination ⁽²⁾			Total
	(Unaudited, in thousands)
Net Revenues
Commissions	$	112,230								$	112,230
Principal transactions		69,429									69,429
Interest income		41,253			214,384						255,637
Interest expense		(3,120	)		(117,606	)					(120,726	)
Gain on sales of originated loans					27,100						27,100
Gain on sale of loans held-for-sale and securities, net					14,062						14,062
Provision for loan losses					(9,055	)					(9,055	)
Other revenues		54,130			19,019			(10,973	)		62,176

Net revenues		273,922			147,904			(10,973	)		410,853

Expenses excluding interest:
Compensation and benefits		59,209			40,769						99,978
Occupancy and equipment		13,592			7,065						20,657
Communications		17,575			1,882						19,457
Professional services		6,584			7,968						14,552
Commissions, clearing and floor brokerage		43,926			1						43,927
Advertising and market development		17,489			17,624			(10,973	)		24,140
Servicing and other banking expenses		534			15,337						15,871
Fair value adjustments of financial derivatives		—			274						274
Depreciation and amortization		14,942			6,915						21,857
Amortization of intangibles		5,054			3,479						8,533
Restructuring and other exit charges		(752	)		(243	)					(995	)
Acquisition-related expenses		—			62						62
Other		16,460			9,008						25,468

Total expenses excluding interest		194,613			110,141			(10,973	)		293,781

Income before other corporate items	$	79,309		$	37,763		$	—		$	117,072


	Three Months Ended December 31, 2003
	Brokerage			Banking			Elimination ⁽²⁾			Total
	(Unaudited, in thousands)
Net Revenues
Commissions	$	97,915								$	97,915
Principal transactions		64,822									64,822
Interest income		38,308			202,996						241,304
Interest expense		(3,473	)		(119,056	)					(122,529	)
Gain on sales of originated loans					20,739						20,739
Gain on sale of loans held-for-sale and securities, net					28,287						28,287
Provision for loan losses					(12,374	)					(12,374	)
Other revenues		51,958			20,350			(7,726	)		64,582

Net revenues		249,530			140,942			(7,726	)		382,746
Expenses excluding interest:

Compensation and benefits		62,802			36,605						99,407
Occupancy and equipment		14,557			6,139						20,696
Communications		20,176			1,437						21,613
Professional services		6,704			7,765						14,469
Commissions, clearing and floor brokerage		41,186			11						41,197
Advertising and market development		4,594			14,752			(7,726	)		11,620
Servicing and other banking expenses		207			15,987						16,194
Fair value adjustments of financial derivatives		—			(398	)					(398	)
Depreciation and amortization		15,521			6,395						21,916
Amortization of intangibles		6,910			4,483						11,393
Restructuring and other exit charges		7,209			1,646						8,855
Acquisition-related expenses		471			(1,468	)					(997	)
Other		14,968			6,982						21,950

Total expenses excluding interest		195,305			100,336			(7,726	)		287,915

Income before other corporate items	$	54,225		$	40,606		$	—		$	94,831

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2004

Page 7


	Three Months Ended September 30, 2003
	Brokerage			Banking			Elimination ⁽²⁾			Total
	(Unaudited, in thousands)
Net Revenues
Commissions	$	92,885								$	92,885
Principal transactions		64,174									64,174
Interest income		36,883			176,254						213,137
Interest expense		(2,442	)		(117,481	)					(119,923	)
Gain on sales of originated loans					53,308						53,308
Gain on sale of loans held-for-sale and securities, net					32,819						32,819
Provision for loan losses					(7,988	)					(7,988	)
Other revenues		47,334			23,008			(1,049	)		69,293

Net revenues		238,834			159,920			(1,049	)		397,705

Expenses excluding interest:
Compensation and benefits		64,025			42,256						106,281
Occupancy and equipment		14,350			7,267						21,617
Communications		18,431			1,451						19,882
Professional services		8,851			14,367						23,218
Commissions, clearing and floor brokerage		41,425			4						41,429
Advertising and market development		4,617			10,497			(1,049	)		14,065
Servicing and other banking expenses		101			16,320						16,421
Fair value adjustments of financial derivatives		—			998						998
Depreciation and amortization		15,495			5,953						21,448
Amortization of intangibles		4,445			4,137						8,582
Restructuring and other exit charges		30,505			16,552						47,057
Acquisition-related expenses		472			62						534
Other		13,628			9,422						23,050

Total expenses excluding interest		216,345			129,286			(1,049	)		344,582

Income before other corporate items	$	22,489		$	30,634		$	—		$	53,123


	Three Months Ended June 30, 2003
	Brokerage			Banking			Total
	(Unaudited, in thousands)
Net Revenues
Commissions	$	85,780					$	85,780
Principal transactions		58,640						58,640
Interest income		34,868			181,891			216,759
Interest expense		(1,877	)		(117,954	)		(119,831	)
Gain on sales of originated loans					62,025			62,025
Gain on sale of loans held-for-sale and securities, net					20,940			20,940
Provision for loan losses					(7,828	)		(7,828	)
Other revenues		45,269			19,333			64,602

Net revenues		222,680			158,407			381,087

Expenses excluding interest:
Compensation and benefits		56,555			42,521			99,076
Occupancy and equipment		16,492			5,067			21,559
Communications		18,083			1,446			19,529
Professional services		18,659			6,936			25,595
Commissions, clearing and floor brokerage		38,516			38			38,554
Advertising and market development		4,767			14,260			19,027
Servicing and other banking expenses		86			18,076			18,162
Fair value adjustments of financial derivatives		—			7,923			7,923
Depreciation and amortization		18,156			6,415			24,571
Amortization of intangibles		4,970			3,140			8,110
Restructuring and other exit charges		68,378			7,729			76,107
Acquisition-related expenses		787			228			1,015
Other		12,365			10,102			22,467

Total expenses excluding interest		257,814			123,881			381,695

Income (loss) before other corporate items	$	(35,134	)	$	34,526		$	(608	)

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2004

Page 8


	Three Months Ended March 31, 2003
	Brokerage			Banking			Total
	(Unaudited, in thousands)
Net Revenues
Commissions	$	60,888					$	60,888
Principal transactions		42,210						42,210
Interest income		34,320			187,386			221,706
Interest expense		(2,513	)		(121,333	)		(123,846	)
Gain on sales of originated loans					56,395			56,395
Gain on sale of loans held-for-sale and securities, net					15,215			15,215
Provision for loan losses					(10,333	)		(10,333	)
Other revenues		41,896			18,039			59,935

Net revenues		176,801			145,369			322,170
Expenses excluding interest:
Compensation and benefits		51,569			41,110			92,679
Occupancy and equipment		17,839			5,550			23,389
Communications		19,600			1,741			21,341
Professional services		5,007			5,379			10,386
Commissions, clearing and floor brokerage		30,106			36			30,142
Advertising and market development		5,046			11,547			16,593
Servicing and other banking expenses		70			16,263			16,333
Fair value adjustments of financial derivatives		—			6,815			6,815
Depreciation and amortization		20,425			6,323			26,748
Amortization of intangibles		4,888			50			4,938
Restructuring and other exit charges		853			1,689			2,542
Acquisition-related expenses		472			835			1,307
Other		12,678			10,747			23,425

Total expenses excluding interest		168,553			108,085			276,638

Income before other corporate items	$	8,248		$	37,284		$	45,532

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2004

Page
9

Key Performance Metrics ⁽³⁾


*Corporate Metrics*	Qtr ended 3/31/04			Qtr ended 12/31/03			*Qtr ended* 3/31/04 vs. Qtr ended 12/31/03		Qtr ended 3/31/03			*Qtr ended* 3/31/04 vs. *Qtr ended* *3/31/03*
Operating margin % ⁽⁴⁾
Consolidated		28	%		25	%	3	%		14	%	14	%
Brokerage		29	%		22	%	7	%		5	%	24	%
Bank		26	%		29	%	(3	)%		26	%	0	%

Employees		3,374			3,455		(2	)%		3,605		(6	)%
Consultants and other		415			314		32	%		223		86	%

Total headcount		3,789			3,769		1	%		3,828		(1	)%

Revenue per headcount	$	108,433		$	101,551		7	%	$	84,161		29	%

Revenue per compensation and benefits dollar	$	4.11		$	3.85		7	%	$	3.48		18	%

Book value per share	$	5.36		$	5.21		3	%	$	4.35		23	%
Tangible book value per share	$	3.90		$	3.73		5	%	$	2.80		39	%

Cash & equivalents ($MM)	$	846.9		$	921.4		(8	)%	$	975.0		(13	)%
Free cash ($MM)	$	704.6		$	649.6		8	%	$	402.0		75	%

Earnings before interest, taxes, depreciation & amortization ($MM)
Net income	$	88.5		$	107.5		(18	)%	$	21.5		312	%
Tax expense	$	49.1		$	66.3		(26	)%	$	15.9		208	%
Depreciation & amortization	$	30.4		$	33.3		(9	)%	$	31.7		(4	)%
Corporate interest expense	$	11.3		$	11.3		0	%	$	11.4		(1	)%

EBITDA	$	179.3		$	218.4		(18	)%	$	80.5		123	%

Interest coverage		15.8			19.3		(18	)%		7.0		125	%

Active retail brokerage accounts		2,880,436			2,848,625		1	%		3,721,017		(23	)%
Active banking accounts		643,240			638,345		1	%		577,532		11	%

Total active accounts end of period		3,523,676			3,486,970		1	%		4,298,549		(18	)%

Total customer households end of period		2,697,951			2,656,025		2	%		3,185,714		(15	)%

Gross new accounts		203,355			154,298		N.M.			234,832		N.M.
Inactive accounts		(92,579	)		(105,214	)	N.M.			(81,855	)	N.M.
Customer closed accounts		(74,070	)		(74,660	)	N.M.			(56,642	)	N.M.

Net new accounts		36,706			(25,576	)	N.M.			96,335		N.M.

Net new households		41,926			(22,384	)	N.M.			53,690		N.M.

Total client assets in investing accounts ($B)	$	75.2		$	70.8		6	%	$	44.8		68	%
Total deposits in banking accounts ($B)	$	12.0		$	12.5		(4	)%	$	9.0		33	%

Total assets / deposits in customer accounts ($B)	$	87.2		$	83.3		5	%	$	53.8		62	%
Average assets per household	$	32,326		$	31,376		3	%	$	16,893		91	%

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2004

Page 10


*Brokerage Metrics*	Qtr ended 3/31/04			Qtr ended 12/31/03			Qtr ended 3/31/04 vs. Qtr ended 12/31/03		Qtr ended 3/31/03			Qtr ended 3/31/04 vs. Qtr ended 3/31/03
Trading days		62.0			62.5		(1)	%		61.0		2	%

Daily Average Revenue Trades (DARTs)
Total Retail		103,052			91,972		12	%		55,209		87	%
- US		88,601			83,081		7	%		49,977		77	%
- International		14,451			8,891		63	%		5,232		176	%
Professional		53,983			48,154		12	%		31,507		71	%

Total DARTs		157,035			140,126		12	%		86,716		81	%

Total revenue trades (MM)		9.7			8.8		11	%		5.3		84	%

Average commission per revenue trade	$	11.53		$	11.18		3	%	$	11.51		0	%

Market Making
Equity shares traded (MM)		34,696			26,190		32	%		10,823		221	%
Average revenue capture per 1,000 equity shares	$	0.768		$	0.912		(16)	%	$	1.374		(44)	%
% of Bulletin Board equity shares to total equity shares		86.4	%		82.9	%	4	%		73.7	%	13	%

End of period margin debt ($B)	$	2.14		$	1.76		22	%	$	0.90		139	%

Average margin debt ($B)	$	1.98		$	1.64		20	%	$	0.96		106	%

Active retail brokerage accounts		2,880,436			2,848,625		1	%		3,721,017		(23)	%

Gross new brokerage accounts		141,717			112,275		N.M.			117,757		N.M.
Inactive accounts		(92,579)			(105,214)		N.M.			(72,625)		N.M.
Customer closed accounts		(17,327)			(13,336)		N.M.			(15,031)		N.M.

Net new brokerage accounts		31,811			(6,275)		N.M.			30,101		N.M.

New client assets ($MM)	$	3,371		$	3,266		3	%	$	2,922		15	%
Client asset outflow from closed accounts ($MM)	$	(570)		$	(400)		(43)	%	$	(309)		(84)	%

Net new client assets ($MM)	$	2,801		$	2,867		(2)	%	$	2,613		7	%

Total Client Assets ($B)
Security holdings	$	47.7		$	43.9		9	%	$	27.2		75	%
Cash (including money market funds)	$	6.0		$	6.2		(3)	%	$	9.4		(36)	%
Unexercised options (vested)	$	21.5		$	20.7		4	%	$	8.3		159	%

Total client assets in investing accounts	$	75.2		$	70.8		6	%	$	44.9		67	%

Total client assets per active account	$	26,120		$	24,861		5	%	$	12,067		116	%

Unexercised options (unvested) ($B)	$	15.3		$	14.9		2	%	$	4.0		278	%

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2004

Page 11


*Banking Metrics*	Qtr ended 3/31/04			Qtr ended 12/31/03			Qtr ended 3/31/04 vs. Qtr ended 12/31/03		Qtr ended 3/31/03			Qtr ended 3/31/04 vs. Qtr ended 3/31/03
Gross new banking accounts		61,638			42,023		N.M.			117,075		N.M.
Inactive accounts		—			—		N.M.			(9,230	)	N.M.
Customer closed accounts		(56,743	)		(61,324	)	N.M.			(41,611	)	N.M.

Net new banking accounts		4,895			(19,301	)	N.M.			66,234		N.M.

Direct mortgage originations ($B)	$	1.1		$	0.9		16	%	$	2.5		(56	)%
Correspondent mortgage originations ($B)	$	0.7		$	1.2		(47	)%	$	1.2		(46	)%
Consumer loan originations, incl HELOCs ($B)	$	0.7		$	0.7		2	%	$	0.6		25	%
Acquired consumer loans ($B)	$	0.1		$	0.7		(85	)%	$	—		N.M.
Mortgage pipeline (end of period) ($B)	$	0.9		$	0.3		206	%	$	1.2		(25	)%

Automated teller machines (ATMs)		15,032			15,057		0	%		15,053		0	%

Bank Asset Portfolio Detail ($MM)
Cash & equivalents	$	165		$	276		(40	)%	$	398		(59	)%
Trading securities	$	809		$	821		(1	)%	$	480		69	%
Investment securities, available-for-sale	$	2,850		$	2,413		18	%	$	1,973		44	%
Mortgage securities, available-for-sale	$	7,000		$	7,157		(2	)%	$	6,417		9	%
Loans receivable, net including loans held-for-sale:
- Mortgage and home equity loans, net	$	4,580		$	4,847		(6	)%	$	3,152		45	%
- Consumer loans, net	$	4,130		$	4,284		(4	)%	$	3,710		11	%
- Other	$	1		$	1		0	%	$	2		(50	)%
Other assets	$	675		$	587		15	%	$	788		(14	)%

Total assets	$	20,210		$	20,386		(1	)%	$	16,920		19	%

Bank Deposit Portfolio Detail ($MM)
Transaction accounts	$	8,767		$	8,988		(2	)%	$	4,597		91	%
CDs	$	3,209		$	3,527		(9	)%	$	4,359		(26	)%

Total	$	11,976		$	12,514		(4	)%	$	8,956		34	%

Bank interest rate spread (basis points)		185			169		9	%		152		22	%

Credit Quality and Reserve Metrics
Net charge-offs as a % of average held-for-investment loans, net (annualized)		0.34	%		0.44	%	(0.10	)%		0.65	%	(0.31	)%
Provision as a % of average held-for-investment loans, net (annualized)		0.44	%		0.65	%	(0.21	)%		0.76	%	(0.32	)%
Allowance as a % of total ending gross held-for-investment loans		0.48	%		0.46	%	0.02	%		0.52	%	(0.04	)%
Total non-performing loans, net, as a % of total gross held-for-investment loans		0.26	%		0.30	%	(0.04	)%		0.44	%	(0.18	)%
Total loan loss allowance as a % of total non-performing loans, net		186	%		154	%	32	%		119	%	67	%

Tier 1 Capital Ratio ⁽⁵⁾		6.21	%		5.92	%	0.29	%		5.90	%	0.31	%
Risk Weighted Capital Ratio ⁽⁵⁾		11.69	%		11.30	%	0.39	%		12.20	%	(0.51	)%

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2004

Page
12

Activity in Allowance for Loan Losses


	Three Months Ended March 31, 2004
	Mortgage			Consumer			Total
	(in thousands)
Allowance for loan losses, ending 12/31/03	$	5,662		$	32,185		$	37,847
Provision for loan losses		2,637			6,418			9,055
Charge-offs, net		(437	)		(6,714	)		(7,151	)

Allowance for loan losses, ending 3/31/04	$	7,862		$	31,889		$	39,751

Bank Average Balance Data


	Three Months Ended March 31, 2004						Three Months Ended March 31, 2003
	Average Balance		Interest Income/ Expense		Average Annualized Yield/Cost		Average Balance		Interest Income/ Expense		Average Annualized Yield/Cost
	(in thousands)
Interest-earning banking assets:
Loans receivable, net	$	8,932,832	$	109,969	4.92	%	$	7,427,819	$	104,703	5.64	%
Interest-bearing deposits		142,301		1,105	3.12	%		142,692		925	2.63	%
Mortgage-backed and related available-for-sale securities		7,297,956		72,031	3.95	%		6,516,528		59,972	3.68	%
Available-for-sale investment securities		2,575,419		25,179	3.91	%		1,642,732		18,067	4.40	%
Investment in FHLB stock		79,469		699	3.54	%		80,718		946	4.75	%
Trading securities		818,509		6,487	3.17	%		366,779		3,309	3.61	%

Total interest-earning banking assets (6)		19,846,486	$	215,470	4.34	%		16,177,268	$	187,922	4.65	%

Non-interest-earning banking assets		447,450						781,678

Total banking assets	$	20,293,936					$	16,958,946

Interest-bearing banking liabilities:
Retail deposits	$	12,018,832	$	48,875	1.64	%	$	8,190,123	$	73,004	3.61	%
Brokered certificates of deposit		372,034		2,328	2.52	%		448,709		3,254	2.94	%
FHLB advances		920,000		10,399	4.47	%		1,008,800		8,131	3.22	%
Other borrowings		5,679,179		56,004	3.90	%		6,066,084		36,944	2.44	%

Total interest-bearing banking liabilities		18,990,045	$	117,606	2.49	%		15,713,716	$	121,333	3.13	%

Non-interest bearing banking liabilities		276,570						437,312

Total banking liabilities		19,266,615						16,151,028
Total banking shareholder’s equity		1,027,321						807,918

Total banking liabilities and shareholder’s equity	$	20,293,936					$	16,958,946

Excess of interest-earning banking assets over interest-bearing banking liabilities/net interest income	$	856,441	$	97,864			$	463,552	$	66,589

Net interest spread					1.85	%					1.52	%

E*TRADE FINANCIAL Results for the Quarter Ended March 31, 2004

Page 13

SUPPLEMENTAL INFORMATION AND ENDNOTES

Explanation of Non-GAAP Measures and Certain Metrics

In order to better assess the Company’s financial operating results, management believes operating margins, free cash, EBITDA and interest coverage are appropriate measures of evaluating the operating and liquidity performance of the Company.

Free Cash and Interest Coverage

Free cash as reported by the Company represents cash held at Parent and non-Bank or Brokerage subsidiaries less discretionary reserves and excess capital at Bank and Brokerage after regulatory capital requirements and the Company’s own regulatory capital guidelines. The Company believes that free cash is a useful measure of the Company’s liquidity as it excludes cash reflected on the balance sheet that may not be freely available to the Company. Interest coverage is defined as EBITDA divided by corporate interest expense.

It is important to note these metrics and other non-GAAP measures may involve judgment by management and should be considered in addition to, not as a substitute for, or superior to, net income, consolidated statements of cash flows, or other measures of financial performance prepared in accordance with GAAP.

(1) For the three months ended March 31, 2004 and December 31, 2003, diluted net income per share is calculated using the ‘if converted’ method, which includes the additional dilutive impact assuming conversion of the Company’s subordinated convertible debt. Under the ‘if converted’ method the per share numerator excludes the interest expense and related amortization of offering costs from the convertible debt, net of tax, of $7.6 million and $7.2 million for the three months ended March 31, 2004 and December 31, 2003, respectively. The denominator includes the shares issuable from the assumed conversion of the convertible debt of 45.4 million. For the three months ended March 31, 2003, the ‘if converted’ method is not used as its effect would be anti-dilutive.

(2) Eliminates intercompany payment made by Bank to Brokerage related to Sweep Deposit Account (SDA) relationships, swept daily from Brokerage to Bank, which began in the third quarter of 2003. Under this relationship, Bank pays Brokerage a negotiated rate that approximates market on the average SDA balance. Bank reflects this payment as advertising and market development expense and Brokerage reflects this payment as other revenues.

(3) Amounts and percentages may not calculate due to rounding.

(4) Consolidated operating margin is defined as income before other corporate items divided by net revenues. Operating margin for Brokerage and Bank is based on segment results.

(5) Q1’04 estimate.

(6) Amounts include a taxable equivalent increase in interest income of $1.1 million for the three months ended March 31, 2004 and $0.5 million for the three months ended March 31, 2003.

End of Filing