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What’s behind the Rise in E*TRADE’s Non-Interest Expenses?

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Non-interest expenses

E*TRADE Financial Corporation (ETFC) incurred total non-interest expenses amounting to $1.47 billion in 2017, which implies an increase of 17% YoY (year-over-year). The company incurred compensation and benefits expenses of $546 million in 2017, compared to $501 million in 2016—mainly reflecting a rise in incentive compensation. The company saw advertising and market development expenses amounting to $166 million in 2017, compared to $131 million in 2016, implying a 27% rise on a YoY basis.

E*TRADE saw professional services expenses of $99 million in 2017. In 2016, it saw $97 million. The company witnessed a rise in clearing and servicing expenses from $105 million in 2016 to $124 million 2017, which implies a rise of 18%.

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Restructuring and acquisition-related activities

E*TRADE witnessed a decline in restructuring and acquisition-related activities from $35 million in 2016 to $15 million in 2017. These expenses were incurred mainly for the OptionsHouse integration. The company incurred occupancy and equipment expenses of $116 million in 2017, compared to $98 million in 2016, which reflects a rise of 18%.

E*TRADE incurred other non-interest expenses of $76 million in 2017, compared to $71 million in 2016—a rise of 7%.

E*TRADE has a price-to-sales ratio of 6.26x on an LTM (last-12-months) basis. Peers (XLF) CME Group (CME), Bank of New York Mellon Corporation (BK), and LPL Financial Holdings (LPLA) recorded 15.36x, 12.76x, and 1.35x, respectively.

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