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Table of Contents
Index to Financial Statements
PART I
ITEM 1. BUSINESS
OVERVIEW
E*TRADE Financial Corporation is a global company, offering a wide range of financial solutions to the self-directed consumer under
the brand “E*TRADE FINANCIAL.” We use technology to provide differentiated trading, investing, banking and lending products, primarily
through the Internet and other electronic media. Because we offer and deliver our products in this manner, our customer base is geographically
dispersed and we have a lower operating cost structure than many traditional “brick and mortar” financial services companies. This lower
operating cost structure allows us to provide financial solutions to our customers at a lower price/rate than traditional financial services
companies. During the past three years, we have focused on broadening our product offerings to expand relationships with customers and to
integrate our products and their supporting technologies to improve profitability.
We serve retail, institutional and corporate customers. In 2004, we derived approximately 60% of our revenues from our retail customers,
of which less than 5% was from our corporate customers, and approximately 40% of our revenues from our institutional customers. Retail
customers are offered a wide range of trading, investing, banking and lending products. We maintain E*TRADE FINANCIAL Centers in New
York City, San Francisco, California; Alpharetta, Georgia; Beverly Hills, California; Boston, Massachusetts; Chicago, Illinois; Costa Mesa,
California; Denver, Colorado; La Jolla, California; Orlando, Florida; Palo Alto, California; Scottsdale, Arizona; and Washington, DC that offer
our retail customers personal access to our team of licensed relationship specialists. We offer, either alone or with our partners, branded retail
brokerage websites in the U.S., Australia, Canada, Denmark, Germany, Hong Kong, Iceland, Japan, Korea, Sweden and the United Kingdom.
Institutional customers are offered access to a broad range of brokerage products and services, including execution services, direct market
access to exchanges through a web-based platform, cross-border trading and third party independent research. Corporate clients use our
employee stock plan administration and options management tools. These corporate client accounts provide us an opportunity to reach their
employees and offer them the products and services that are offered to our retail customers.
Our corporate offices are located at 135 East 57th Street, New York, New York 10022. We maintain significant domestic corporate and
operational offices in Arlington, Virginia; Menlo Park, California; Irvine, California; Chicago, Illinois; Rancho Cordova, California; and
Alpharetta, Georgia. Although not as significant, we maintain international offices in London, United Kingdom; Stockholm, Sweden;
Copenhagen, Denmark; Berlin, Germany; Tokyo, Japan; and Hong Kong. The Company was incorporated in California in 1982 and
reincorporated in Delaware in July 1996. We have approximately 3,300 employees.
Our financial results are presented as two segments, brokerage and banking, which have different characteristics. The brokerage segment
generates revenues primarily from customer trading, market-making activities, proprietary trading, margin lending and brokerage-related fees.
The banking segment generates revenues primarily from its diversified interest-
earning assets (banking assets held which earn interest income),
gains on sales of loans and banking-related service charges and fees from asset management. During 2004, exclusive of intersegment revenues,
the brokerage segment generated approximately 60% and the banking segment generated 40% of the Company’s consolidated net revenues.
Our significant brokerage and banking subsidiaries are as follows:
Brokerage:
•
E*TRADE Brokerage Holdings, the parent company of the following subsidiaries:
1
•
E*TRADE Securities LLC (“E*TRADE Securities”), a registered broker-dealer and provider of brokerage services to both retail
and institutional customers;