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September 16, 2004 Mahn Chey Sandra Chong Gerald Koh Jeong Min Lee Jun Kyu Lee Cynthia Morikone

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.

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September 16, 2004 Mahn Chey Sandra Chong Gerald Koh Jeong Min Lee Jun Kyu Lee Cynthia Morikone

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  1. Team Presentation September 16, 2004 Mahn Chey Sandra Chong Gerald Koh Jeong Min Lee Jun Kyu Lee Cynthia Morikone

  2. Contents Overview Business Model Competitive Structure Value Chain Analysis SWOT Analysis IT Use Q&A

  3. Overview E*TRADE FINANCIAL has emerged as a diversified financial services company. • 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 Products Customers • Retail • Corporate • Institutional • Brokerage • Banking Channels • Web • ATMs • Financial Centers • Relationship Managers • Call Centers 1) OTS: Office of Thrift Supervision (U.S. Dept. of Treasury) Source: Yahoo! Financial, Hoover’s Online, E*TRADE website

  4. Overview – Brief History 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, whichbecame 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

  5. Business Model – Products and Services E*trade provides a wide array of financial services to retail, corporate, and institutional customers E*TRADE Product and Service Offerings Retail Corporate Institutional Brokerage • U.S. retail • International retail • Professional trading • Stock plan administration • Options management • Institutional marketing making • Cross-border trading • Independent research Bank • 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. Business Model - Revenue Diversification drives revenue growth Revenue growth (1996-2002) Net Revenues (2002) Unit: Million $ Other banking related revenues $ 1,326 Million Gain on sales of loans held-for-sale and securities Gain on sales of originated loans Commissions Net banking interest income Net brokerage Interest income Other brokerage related revenue $ 52 Million U.S. retail brokerage Principal transactions Banking Brokerage $459 Million (34.6%) $867 Million (65.4%) Source: E*TRADE 10-K SEC Filings

  7. Business Model - Cost Cost of services and operating expense are 43 % and 38% respectively as a percentage of revenue. Cost of services and operating expenses (2002) ($ million) • 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 General and administrative Selling and marketing 503 Technology development Total net revenue Cost of services Operating income Operating expenses Source: E*TRADE 10-K SEC Filings

  8. Business Model - Profitability However, profitability has been low and was severely strained in the recent economic slowdown and fierce competition ROE, % (1996 - 2002) Source: E*TRADE 10-K SEC Filings, www.etrade.com

  9. Competitive Structure 1996 Market Space

  10. Competitive Structure Current Market Space

  11. Competitive Structure Competitive Structure using Porter’s model

  12. Planning/Management Environmental Corporate Services/Facilities Financials Legal External Relationships Manage Human Resources Develop & Maintain Systems/Technology Procure Materials / Services 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 cash management Perform customer service Perform remittances Prepare customer statements Prepare deal confirmations Brokerage Perform Credit analysis Structure & negotiate transaction Review & Extend credit Develop investment strategy Perform collections Perform asset recovery Manage assets Banking Market & Sell Originate & Monitor Credit Manage Investment Process & Maintain Accounts Customer Service Collect Value Chain Value Chain Analysis Source: PriceWaterhouseCoopers

  13. SWOT SWOT Analysis Opportunities Strength Economic recovery Increasing number of internet users High switching cost First mover & strong ecommerce brand Strong IT background Efficiency and scalability of its E-business model Revenue diversification Personalized and integrated online hub Weakness Threat Customer’s service demand increase Intense competition High switching cost Easily be commoditized Hard to expand services that require human interaction

  14. IT Use Leveraging IT and passing savings on to customers Early Stage Today • IT Background: On-line brokerage services provider • Outstanding IT system • Reduced cost & commission  Attracted more frequent traders • 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

  15. Thanks! Q & A

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