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Team Presentation. September 16, 2004 Mahn Chey Sandra Chong Gerald Koh Jeong Min Lee Jun Kyu Lee Cynthia Morikone. Contents. Overview Business Model Competitive Structure Value Chain Analysis SWOT Analysis IT Use Q&A. Overview. - PowerPoint PPT Presentation
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September 16, 2004
Mahn CheySandra Chong
Gerald KohJeong Min Lee
Jun Kyu LeeCynthia Morikone
Team Presentation
2
Contents
Overview
Business Model
Competitive Structure
Value Chain Analysis
SWOT Analysis
IT Use
Q&A
3
E*TRADE FINANCIAL has emerged as a diversified financial services company.
Overview
Customers
Retail
Corporate
Institutional
Products
Brokerage
Banking
Channels
Web ATMs Financial Centers Relationship Managers Call Centers
Website : www.etrade.com
Core strategy is to create value for customers and competitive advantage by utilizing technology primarily through electronic delivery channels
The third largest online brokerage and a leading site for active traders.
More than 4 million account holders trade stock through online services, the Internet and phone.
Power E*TRADE : $9.99 flat commissions and 9-second execution guarantee
The eighth largest OTS1)-regulated financial institution.
The second largest domestic ATM network
1) OTS: Office of Thrift Supervision (U.S. Dept. of Treasury)Source: Yahoo! Financial, Hoover’s Online, E*TRADE website
4
Building on its foundation in online brokerage, E*TRADE has expanded to provide an integrated financial services
1982 William Porter founded E*Trade, an electronic brokerage service for stockbrokers
1992 Established E*Trade Securities, which became one of the pioneers in electronic brokerages
1996 Began offering its services on the Internet with the launch of its website www.etrade.com
1996 IPO
1998 Began to position itself globally (Australia, Canada, Germany, Israel, Korea and Japan)
1999 Acquired Telebanc, an online bank with more than 100,000 depositors, and started E*TRADE Bank
2000 Acquired more than 4,000 ATMs from XtraCash ATM, Inc.
2001 Began the consolidation, restructuring and exit of certain international brokerage operations
2002 Became E*TRADE Financial
2003 Progressing on its restructuring plan implementation
Source: Yahoo! Financial, Hoover’s Online, E*TRADE website
Overview – Brief History
5
E*trade provides a wide array of financial services to retail, corporate, and institutional customers
Business Model – Products and Services
Retail Corporate Institutional
Brokerage
Bank
U.S. retail International retail Professional trading
Stock plan administration
Options management
Institutional marketing making
Cross-border trading Independent research
E*TRADE Product and Service Offerings
Deposits (checking, savings)
Credit cards Mortgages Consumer finance Insurance ATM Network
Money management programs
Employee banking
Asset management Investment portfolio Correspondent
mortgage
Source: E*TRADE 10-K, 10-Q SEC Filings, www.etrade.com
6
Diversification drives revenue growth
Business Model - Revenue
Source: E*TRADE 10-K SEC Filings
0
200
400
600
800
1000
1200
1400
1996 2002
Unit: Million $Net Revenues (2002)
Gain on sales of loans held-for-sale and securities
$867 Million (65.4%)$459 Million (34.6%)
Other banking related revenues
Other brokerage
relatedrevenue
Principaltransactions
Commissions
BrokerageBanking
Net brokerageInterest income
Gain on sales oforiginated loans
Net banking interest income
$ 52 MillionU.S. retail brokerage
$ 1,326 Million
Revenue growth (1996-2002)
7
Cost of services and operating expense are 43 % and 38% respectively as a percentage of revenue.
Business Model - Cost
1326
567
256
Totalnet
revenue
Costof
services
Sellingand
marketing
Technologydevelopment
Generaland
administrative
Operatingexpenses
Operatingincome
Cost of services– Customer service, system maintenance
and technology operation. General and administrative expenses
– Executive and administrative personnel, professional services and other corporate activities
Selling and marketing expenses– Expenditures for advertising placements,
creative development and collateral materials
Technology development– Design and development expense to
internally develop software to add substantial new functionality
503
Source: E*TRADE 10-K SEC Filings
Cost of services and operating expenses (2002)($ million)
8
-20%
-15%
-10%
-5%
0%
5%
10%
1996 1997 1998 1999 2000 2001 2002
However, profitability has been low and was severely strained in the recent economic slowdown and fierce competition
Source: E*TRADE 10-K SEC Filings, www.etrade.com
ROE, % (1996 - 2002)
Business Model - Profitability
9
1996 Market Space
Competitive Structure
10
Current Market Space
Mer
ril L
ynch
Ban
k of
Am
eric
a
Ban
kOne
E*T
rade
Cha
rles
Sch
wab
Fide
lity
Inve
stm
ents
Qui
ck a
nd R
eilly
Lom
bard
Executing Trades x x x x x x xPersonal Advice x x x x xBanking / Lending x x x x x xInsurance x x xCredit Cards x x x x xEstate Planning x x x x x x xRetirement x x x x x x xMortgages x x x x
Competitive Structure
11
Competitive Structure using Porter’s model
Competitive Structure
12
Value Chain Analysis
Target market & set risk criteria
Develop account strategy
Manage relationships/ cross sell
Define & price products
Setup & maintain account files
Process transactions
Calculate fees/interest
Process & maintain positions
Perform Credit analysis Structure & negotiate
transaction Review & Extend credit Develop investment
strategy
Perform cash management
Perform customer service
Perform remittances
Prepare customer statements
Prepare deal confirmations
Perform collections Perform asset
recovery Manage assets
Banking
Brokerage
Procure Materials / Services
Develop & Maintain Systems/Technology
Manage Human Resources
Planning/Management Environmental Corporate Services/Facilities Financials Legal External Relationships
Market& Sell
Process &MaintainAccounts
CustomerService
CollectOriginate & Monitor CreditManage Investment
Source: PriceWaterhouseCoopers
Value Chain
13
SWOT Analysis
Threat Customer’s service demand increase Intense competition High switching cost Easily be commoditized
OpportunitiesStrength
Weakness Hard to expand services that require
human interaction
First mover & strong ecommerce brand Strong IT background Efficiency and scalability of its E-business
model Revenue diversification Personalized and integrated online hub
Economic recovery Increasing number of internet users High switching cost
SWOT
14
Early Stage
IT Background: On-line
brokerage services provider
Outstanding IT system
– Reduced cost &
commission Attracted
more frequent traders
Today
Backbone of the company's strategy
– Fully integrated financial operations
– Digital Financial Media : wireless trading anytime, anywhere and from any device
– Global cross-border trading network
Leveraging IT and passing savings on to customers
IT Use
15
Thanks!
Q & A