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

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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)

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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