ETrade boss out as profit dims

Discount broker ETrade Financial said CEO Karl Roessner has resigned, effective immediately and will be replaced by the company’s chief operating officer, Michael Pizzi.

Roessner, who had been chief executive since mid-2017, is the second top exec of an online broker to step down abruptly in recent months.

TD Ameritrade announced on July 22 that CEO Tim Hockey would resign in February, a move that shocked industry observers.

Sandler O’Neill analyst Richard Repetto said in a note that there may have been some friction between Roessner and the ETrade board, but that “Roessner stated emphatically that it was his decision to resign for ‘personal reasons.’ ”

Pizzi, a “company veteran who has experience across many functions, ” according to Repetto, is not expected to change ETrade’s strategy or independence.

ETrade missed consensus estimates in the second quarter, reporting 90 cents a share versus $1.09, according to FactSet. What’s more, analysts have lowered their 2019 earnings estimates by 4.5 percent over the past three months, expecting the firm to earn $4.14.

With revenue under pressure, ETrade sold $4.5 billion of securities in the second quarter and announced a new $1.5 billion, three-year buyback program.

Insiders noted that online brokers are working in a much tougher operating environment now that the Federal Reserve has cut interest rates.

ETrade scrapped its operating margin of 50 percent for 2020 “with a reduced revenue outlook clearly playing a role,” according to a recent note from Wells Fargo analyst Christopher Harris.

He also said that while ETrade reaffirmed its long-term earnings-per-share targets, “we recognize investors will assign a lower valuation multiple to EPS supported by expense cuts and stock buybacks” (vs. revenue growth).

Shares fell 12 cents, to $40.25.