E*Trade Launches Mortgage Operation

by Caroline Maxwell, Investors Offshore.com

20 June 2001

In an attempt to capitalize on the aquisition of LoansDirect, one of America's largest online mortgage originators, online brokerage group E*Trade announced this week that it has launched a mortgage service to run alongside its trading and wealth management services. The group says that the establishment of the mortgage operation is the latest step in an ongoing diversification strategy designed: 'to integrate online mortgage origination with internet brokerage, value-added banking and other wealth management products and services.'

In these lean times, diversification is necessary for survival. Online trading in general is reportedly down 40% from last year, and despite valiant attempts to hang on for the semi-mythical 'second generation' risk averse traders that have supposedly been just around the corner for the past few months, former pure discount brokers are now being forced to rely on parent companies, diversify their operations, or go slowly and painfully to the wall.

E*Trade feel that their brand is trusted and recognisable enough, however, and are confident that their new venture will prove successful. 'The E*Trade brand doesn't stand for just brokerage anymore,' said Mitchell H. Caplan, the company's chief global banking and wealth management officer.

The launch follows recent announcements by rival Charles Schwab, once the leading light of online brokerages, that both its American and European businesses are running high losses, despite having enhanced its product offerings with Self Invested Personal Pensions (SIPS) and a forthcoming bond offering. The E*Trade Group, on the other hand, is expected to end its second quarter by breaking even. Not great compared to the glory days, but still something of an achievement.

Recommended