E*Trade fires 240 employees to give brokerage clients better prices on trades,etc to retain and grow core its business. The company is still dealing with a mortgage portfolio from 2007 that is still impacting the company with losses and viability to find any company to buy or merge with E*Trade.
E*Trade Fired 40 Employees This Week Amid Cost Cuts — Sources
E*Trade Financial Corp. ( ETFC ) fired at least 40 employees this week and 200 over the past 90 days, with Chief Operating Officer Gregory Framke and two high-ranking trading executives among those departing the company, according to people familiar with the personnel moves.
This week’s departures come just over two weeks after new Chief Executive Paul Idzik joined the company, E*Trade’s seventh CEO, counting interim heads, since late 2007.
Mr. Idzik, a former Barclays PLC (BCS, BARC.LN) COO, started his new job on Jan. 22. Two days after his arrival, E* Trade boosted its cost-cutting target to $110 million from $100 million, with $80 million of the savings expected to come from “compensation and professional services.” The overall target doesn’t include $10 million in offsetting expenses.
The layoffs are part of the online brokerage’s ongoing efforts to slash costs as it struggles to recover from mortgage-related losses that have weighed down its results over the past five years. E*Trade reported 3,088 employees as of Dec. 31, down 9% from 3,407 a year earlier.
Mr. Framke, a 12-year E*Trade veteran who oversaw global technology
development at the company, left E*Trade on Monday, though he will act as an adviser to the company through March, according to a recent regulatory filing.
Other departures from E*Trade include Christopher Larkin, senior vice president of retail trading and client services, and Kevin Kernahan, director of trading and order management, these people said. Mr. Kernahan is no longer with the company, while Mr. Larkin will remain with E*Trade until March 1, one of the people said.
The expected departures of Mr. Larkin and Mr. Kernahan follows E*Trade’s November disclosure of an internal review of its handling of orders from customers of its online brokerage after Kenneth Griffin, a director who runs the hedge fund firm Citadel LLC, the company’s largest shareholder, expressed concerns about the matter.
In November, E*Trade said a director’s questions prompted the inquiry but didn’t identify the board member in its filing.
Mr. Griffin told people close to him he was concerned about whether E*Trade customers were receiving the best possible prices on their trades, compared to what they might receive if outside firms handled the orders, according to people familiar with discussions about the matter.
Chicago-based Citadel competes with other brokers and banks, such as Knight Capital Group Inc. (KCG), UBS AG (UBS) and Citigroup Inc. (C), to trade stock orders that flow out of discount brokerage firms. Such market-makers pocket profits by trading with individual investors, while pledging to provide more-competitive prices on trades than investors might get by having their orders filled on stock exchanges.
In the November filing, E*Trade said the review is “being conducted by separate firms of outside broker-dealer and bank regulatory counsel.” In response to a director’s questions, the firm’s chairman, Frank Petrilli, and its general counsel initiated the probe.
Mr. Griffin’s hedge-fund firm owns 9.6% of E*Trade’s shares and helped lead two capital injections for the online brokerage in 2007 and again in 2009. He joined the company’s board that year.
In 2011, Citadel pushed E*Trade to sell itself, though the company elected to remain independent amid sluggish market conditions.
While U.S. stock markets showed renewed vigor in January, discount brokerage firms, alongside Wall Street banks and exchanges, have grappled with a three-year slide in stock-trading activity among individual investors and financial institutions, who broadly moved to the sidelines due to fiscal turmoil in Europe and a slow-moving economic recovery in the U.S.
Shares of E*Trade closed Thursday up 0.6% at $10.99. The stock has climbed 23% so far in 2013.
Write to Brett Philbin at brett.philbin
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(END) Dow Jones Newswires 02-07-131905ET Copyright (c) 2013 Dow Jones & Company, Inc.
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Filed under: Donny Wise Live in Personal Finance Tagged: Barclays, Citadel LLC, Citigroup, E-Trade, Knight Capital Group, November, UBS, Wall Street
