NEW YORK -- E-Trade Financial's stock fell more than 8 percent on Friday after the company posted a surprising third-quarter loss.
THE SPARK: E-Trade Financial Corp. said after the market closed on Thursday that it lost 10 cents per share in the July-to-September quarter. Analysts surveyed by FactSet, on average, expected profit of 8 cents per share.
Revenue declined 3 percent to $490 million, but beat Wall Street's forecast of $415.8 million.
THE ANALYSIS: David Chiaverini of BMO Capital Markets said that E-Trade missed Wall Street's view _ and his earnings estimate of 11 cents per share _ mainly because it set aside more cash to cover loans that go unpaid.
E-Trade's loan loss provision jumped to $141 million, from $98.4 million a year ago and "significantly higher" than Chiaverini's forecast for $59 million. Delinquent loans fell overall, but the loans written off as uncollectible edged up about 1 percent.
Chiaverini noted that the increased provision for bad loans reflected an additional $50 million that was recognized as a result of the company receiving new bankruptcy data from a third-party servicer that had not been reporting borrower bankruptcy data on a timely basis.
He also noted that the company plans to pay down debt by $3 billion in the fourth quarter, which should make it possible for -E-Trade to refinance other high-cost loans.
Chiaverini kept a "Market Perform" rating on the stock.
SHARE ACTION: Shares of E-Trade shed 77 cents, or 8.1 percent, to $8.65 in midday trading. The stock has ranged from $7.08 to $11.69 over the past 52 weeks.