eTrade 2015 Annual Report Download - page 3

CAPITAL POSITION AND DEPLOYMENT
We executed vigorously on the capital front during the year,
exceeding our own demanding expectations on a number
of key measures. We achieved meaningfully lower capital
requirements at the bank well ahead of plan as well as the
Street’s expectations. We generated healthy levels of capital,
distributing more than $800 million of excess to the parent,
all the while bolstering our bank’s capital position. We began
deploying capital through four major actions — two of which
we completed and two of which continued in flight in 2016.
The first was a reduction in corporate debt — closing the
chapter on a series of meaningful pay-downs and refinances
to reach our target of $1 billion outstanding, at the lowest
coupons in Company history with a vastly improved maturity
profile. The second was the termination of $4.4 billion of
costly legacy liabilities in the form of wholesale funding,
which created capacity to begin our next action — growing
the balance sheet to our targeted $49.5 billion. Finally, we
embarked on an $800 million share buyback program to
return capital directly to our owners.
Today, the Company is well positioned to continue executing
on these initiatives while vigilantly looking for additional
ways to deploy capital to benefit our owners, including
opportunities for inorganic growth.
RISK PROFILE
The Company’s significantly improved risk profile — largely
driven by hard work to bolster our enterprise risk management
framework — was further benefited by the reduction of legacy
risks associated with our loan portfolio. We hit an important
inflexion point in this regard, reducing loan reserves for
two consecutive quarters driven by better than expected
performance. The portfolio continues to dwindle in size and
importance, ending the year at a mere 15 percent of its peak
size.
Our progress and position were recognized by our regulators
and rating agencies across important dimensions. First, the
Memoranda of Understanding at both the bank and parent
were lifted. Next, reflective of our much improved risk profile
and regulatory standing, our FDIC insurance rates were cut by
more than half. We also achieved lower capital requirements at
the bank, reducing our Tier 1 leverage ratio target by 150 bps
— 50 basis points and a full year ahead of our original plan.
Each of our credit rating agencies — S&P and Moody’s —
bestowed us with investment grade ratings in 2015 for the
first time in the Company’s history. This distinction represents
the culmination of years of diligent work delivering on our
strategy of de-risking the franchise while optimizing capital.
These ratings followed a remarkable seven notches worth of
cumulative upgrades between the two agencies during the
year.
CUSTOMER EXPERIENCE
With the digital experience core to our offering, we rolled
out an attractive assortment of enhancements to our Web,
software, and mobile platforms.
On etrade.com, we launched a new welcome page for
prospective customers to better engage window shoppers
when they step into the store. The initial launch contributed
to an improvement in the funding rate for new accounts
channeled through the new welcome page. Once in the door,
customers were met with several enhanced experiences,
including: a revamped Account Overview page, which
integrates core functionality all on one page; our new
Retirement Center, which delivers engaging widgets to help
investors take charge and keep their goals on track; our new
Tax Center, which eases an annual process that is notoriously
stressful and convoluted; and TipRanks, which presents
analyst sentiment on individual stocks in an ultra-clear way,
analyzing and aggregating recommendations from thousands
of sell side analysts and financial bloggers.