E TRADE FINANCIAL Corporation: Business Update September 15, 2009

E*TRADE FINANCIAL Corporation
Business Update
September 15, 2009
© 2009 E*TRADE FINANCIAL Corp. All rights reserved.

This presentation contains confidential information and may not be disclosed without
E*TRADE FINANCIAL Corporation’s written permission.
Safe Harbor Statement
This presentation contains certain projections or other forward-

looking statements regarding future events or the future
performance of the company. Various factors, including risks
and uncertainties referred to in the 10Ks, 10Qs and other
reports E*TRADE FINANCIAL Corporation periodically files
with the SEC, could cause our actual results to differ materially
from those indicated by our projections or other forward-
looking statements. This presentation also contains disclosure
of non-GAAP financial measures. A reconciliation of these
financial measures to the most directly comparable GAAP
financial measure can be found on the investor relations site at
https://investor.etrade.com
© 2009 E*TRADE FINANCIAL Corp. All rights reserved.
2 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

Overview
Completed major recapitalization

Bolstered Bank capital
Reduced Parent debt burden
Thriving online brokerage business
Demonstrating leadership in industry with strong
secular growth trends
Continuing to exceed expectations and
remaining competitive among largest online brokers
Strategically investing for long-term growth
Improving loan performance trends
Expect continued reduction in loan loss provision

Completed Major Recapitalization

Completed Major Recapitalization:
Raised more than $600 million of common equity in Q2

Q2 Actions ($ in millions) Proceeds
Equity Drawdown Program $65
Follow-on common stock offering $550
Total gross proceeds $615
Net proceeds $586
Exchanged $1.7 billion of high yield debt for zero coupon
convertible debentures
Debt Exchanged $1.7 billion

Annual Interest Payment Reduction $198 million

Bolstered Bank capital, maintaining ratios in excess of
regulatory well-capitalized thresholds
Net proceeds from Q2 actions $586

Amount contributed to Bank in Q2 $500
Estimated as of 8/31/09(1) Excess

Ratio
($ in millions) to well-capitalized
Total capital to
risk-weighted assets
13.8% $875
Tier I Capital to
risk-weighted assets
12.5% $1,497
Tier I Capital to
adjusted total assets
6.6% $692

Reduced Parent debt burden through debt exchange
Annual Interest Payments

8% 7 3/8% 7 7/8% 12 ½%
($ in millions) (2) Total
Due 2011 Due 2013 Due 2015 Due 2017
Before exchange $35 $31 $19 $273 $358
After exchange $0 $31 $19 $109 $160
Change ($35) $0 $0 ($164) ($198)
Outstanding Interest-Bearing Debt

8% 7 3/8% 7 7/8% 12 ½%
($ in millions) (2) Total
Due 2011 Due 2013 Due 2015 Due 2017
Before exchange $435 $415 $243 $2,186 $3,279
After exchange $3 $415 $243 $876 $1,537
Change ($432) $0 $0 ($1,310) ($1,742)

Thriving Online Brokerage Business

Thriving Online Brokerage Business
Growing and competitive business

Trading volume and account growth at competitive levels
Market recognition of industry leadership
Profit and growth through discipline and focus
Emphasis on core online brokerage franchise
Disciplined management of expenses and service quality
Investing in business for long-term growth
Full investment pipeline for active traders and long term investors
Marketing to drive brokerage account growth

Thriving Online Brokerage Business:
Customer DART growth exceeding expectations
250
1177%%
/ YTTDD
/Y e
YYTTDD e asse
225 cr
IInncrea
221
216
200
204
194 190
175 185 181 184
172
(000's)
150 161 161
125
100
75
0
50
07
07
07
07
08
08
08
08
09
09
TD
Q
1
2
Q
3
Q
Daily Average Revenue Trades

Thriving Online Brokerage Business :
Competitive within largest online brokers
DARTs Indexed to Q1 2006

165
155
145
135
125
115
105
95
85
75
65
06
06
06
06
07
07
07
07
08
08
08
08
09
09
1
2
Q
Q
ETFC AMTD SCHW

Continued record brokerage accounts
2,800 88..55%
%
/y
yy/y e
asse
2,750 IInncrreea
c
2,733
2,700 2,715
2,650
2,661
2,600
(000's)
2,597
2,550
2,500 2,520
2,492 2,501
2,450 2,475 2,478
2,449 2,453
2,400
2,350
2,300
0
07
07
07
07
08
08
08
08
09
09
TD
Q
1
2
Q
Q
09
3
Brokerage Accounts
Q
Improved brokerage account attrition
200%
175%
167% 165%
150%
144%
128% 124% 124% Attrition Rate (3)
118% 120%
100% Q3 08: 15.4%
110%
Q3 09
76% ^QTD: 9.4%
50%
0%
07
07
07
07
08
08
08
08
09
09
TD
Q
1
2
Q
09
3
Q
(3)(a)
Gross New Brokerage Accounts / Attriting Brokerage Accounts

Market recognition of industry leadership

Brokerage related cash growing in 2009
$25
se
$20 In crea
25%
$15
(MM)
$10
$5
$0
$0
07
07
07
07
08
08
08
08
09
09
9
-0
1
1
4
ug
Q
A
Brokerage related cash

Recovery of non-interest income for Trading and Investing segment
$240
$230
$220
$210
(MM)
$200
$190
$180
$0
$170
07
07
07
07
08
08
08
08
09
09
1
2
Q
Q
Total non-interest income

Generation of substantial net operating interest income
Net Operating Interest Income
$450
$400
$350
$300
$250
(MM)
$200
$150
$100
$50
$0
07
07
07
07
08
08
08
08
09
09
1
2
Q
Q
Trading and Investing Balance Sheet Management

Disciplined expense management
Total Operating Expense

$500
$400 17% Decli

ne
$300
(MM)
$200
$485
$345 $374 $349 $345 $311 $314

$288 $281 $287
$100
$0
07
07
07
07
08
08
08
08
09
09
1
2
Q
Q
Total operating expense FDIC insurance preimiums and fees

Full development pipeline of tools for active traders
and long-term investors
New Products
E*TRADE Mobile Pro for
BlackBerry® and iPhone™
Investor Resource Center
Online Advisor
Excel Manager on Power E*TRADE
Pro
Enhancements
Back-testing and advanced
screeners
Fixed Income, Mutual fund, ETF
tools for long term investors;
Portfolio Margining
iPhone™ is a trademark of Apple Inc. BlackBerry® is a registered trademark of RIM

Full development pipeline of tools for active traders
and long-term investors
Tools focused on active traders Tools focused on

long-term investors

Highly effective advertising driving brokerage account growth
Brand identification /
Features and function
Market &
Event driven
Validation tagline

Improving Loan Performance
Trends

Improving Loan Performance Trends
Portfolio in full run-off mode

Proactively managing to reduce charge-offs
Eliminated significant risk from open lines
Portfolio showing meaningful improvements
Home equity delinquencies significantly lower
1-4 family delinquencies gradually declining
Provision and charge-offs approaching “inflection point”
Loan loss provision and internally-generated Bank capital
reaching breakeven point

Improving Loan Performance Trends:
Loan portfolio in full run-off mode
Loan Loan (4)

(4) Net (5) Net
($ in billions) Balance Balance
Paydowns Charge-Offs
9/30/07 6/30/09
1-4 family Loans $16.9 ($4.7) ($0.3) $11.9
Home equity $12.4 ($2.1) ($1.4) $9.0
Consumer $3.0 ($0.8) ($0.1) $2.1

29% Decline
TOTAL $32.3 ($7.6) ($1.8) $22.9

Home equity delinquency trends show improvement
partly due to low 2007 vintage and overall seasoning
s Home Equity Unpaid

5 m oonntthhs
2003 m
445 raggee
and older aavveerae Balances by Origination Vintage
aagge
2007
2004 2008 $0.0B 0%
2007 $1.1B 12%
2006 $4.1B 46%
2005
2005 $2.2B 25%
2006 2004 $0.9B 10%
2003 $0.7B 8%
and older
Total $9.0B 100%

Proactively managing to reduce exposure
Undrawn Home Equity Lines

$8.0
$7.0
$7.3
$6.0
$6.3
77%
( $5.
$5.0 $5.6 6B
) Re
du
ctio
(B)
$4.0 n
$3.0 $3.7
$3.0
$2.0 $2.5
$2.0
$1.7
$1.0
$0.0
07 07 08 08 08 08 09 09
3 4 1 2 3 4 1 2
Q Q Q Q Q Q Q Q

Home equity delinquencies significantly lower in 2009
$450
$400
34% Y
T D Dec
$350 line
$300
$250
(MM)
$200
$150
$100
$50
$0
9
9
9
08
9
09
9
-0
-0
l-0
-0
-0
0
0
n-
-
n-
b-
pr
ar
ay
ug
ec
Ju
Ja
Fe
Ju
M
M
D
A
30-89 Days Delinquent

1-4 Family delinquencies gradually declining
$650
$600 12% De
c line
$550
(MM)
$500
$450
$0
$400
9
9
08
9
9
9
09
9
-0
-0
l-0
-0
-0
0
0
n-
-
n-
b-
pr
ar
ay
ug
ec
Ju
Ja
Fe
Ju
M
M
D
A
30-89 Days Delinquent

Declining provisions converging with net charge-offs
$600
$500
Over Past
6 Quarters
$400 Provision for loan
losses 1.4x net
charge-offs
(MM)
$300
($MM)
Provision for
$200 loan losses
Net charge
$100 -offs
$0
Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09
Range
Allowance for loan losses
$566 $636 $874 $1,081 $1,201 $1,219

Internal regulatory capital generation to absorb loan charge-offs
$500
Sources Uses
Historical net
(usage)(8) (MM) $400
Loan loss
Q1 08 $260 provision
$300
Q2 08 ($73)
(MM)
Capital release
from other
Q3 08 ($348) $200 sources (6)
Q4 08 ($59) Capital release
(6)
Q1 09 ($270) $100 from loan run-off

(7)
Q2 09 ($33) Bank earnings
$0
Q2 09 Net (usage)(8) of ($33)MM

09
2
Q
Footnoted items are non-GAAP financial measures. See the Appendix for a reconciliation to the most directly comparable GAAP financial measures.

Overview
Completed major recapitalization

Bolstered Bank capital
Reduced Parent debt burden
Thriving online brokerage business
Demonstrating leadership in industry with strong
secular growth trends
Continuing to exceed expectations and
remaining competitive among largest online brokers
Strategically investing for long-term growth
Improving loan performance trends
Expect continued reduction in loan loss provision

Appendix
Explanation of Non-GAAP Measures and Certain Metrics
Management believes that operating income (pre-credit cost) and bank earnings before taxes and before credit losses are appropriate measures for evaluating the operating and liquidity
performance of the Company. Management believes that the elimination of certain items from the related GAAP measures is helpful to investors and analysts who may wish to use some or all
of this information to analyze our current performance, prospects and valuation. Management uses non-GAAP information internally to evaluate our operating performance in formulating our
budget for future periods.
(1)Capital ratios are at the E*TRADE Bank level. The ratios and excess capital amounts are August 09 estimates based on the regulatory minimum well-capitalized threshold.
(2) Interest on the 12 ½% Springing Lien Notes may be paid in kind (PIK) through May 2010.
(3) The attrition rate is calculated by dividing attriting brokerage accounts (a) (annualized) by total brokerage accounts.
(a) Attriting brokerage accounts: Gross new brokerage accounts, less net new brokerage accounts
(4) Represents unpaid principal balances.
(5) Net paydowns includes paydowns on loans, as well as limited origination activity, home equity advances, repurchase activity and transfers to real estate owned assets.
(6) The capital release from loan run-off only includes the decrease in risk based capital required for our 1-4 family, home equity and consumer loan portfolios. This slide does not depict the
capital impact related to changes in other risk-weighted assets (represented in ‘other’ line in the below chart), such as securities, and the impact of our provision for loan losses.
Q209 Q109 Q408 Q308 Q208 Q108

Beginning excess risk-based capital $ 444 $ 715 $ 524 $ 622 $ 695 $ 435
Pre-credit earnings 232 181 156 206 229 184
Provision for loan losses (405) (454) (513) (518) (319) (234)
Loan portfolio run-off and other 140 2 298 (36) 17 310
Cash infusion 500 - 250 250 - -
Ending excess risk-based capital $ 911 $ 444 $ 715 $ 524 $ 622 $ 695

Appendix
(7) Bank earnings before taxes and before credit losses represents the pre-tax earnings of E*TRADE Bank Holding Company (“ETBH” or “Bank”) before discontinued
operations, loss on securities, net and provision for loan losses. This metric shows the amount of earnings that the Bank, after accruing for the interest expense on its trust
preferred securities, generates each quarter prior to credit related losses, primarily provision and gain (loss) on securities. Management believes this non-GAAP measure
is useful to investors and analysts as it is an indicator of the level of credit related losses the Bank can absorb without causing a decline in E*TRADE Bank’s excess risk-
based capital.
Below is a reconciliation of Bank earnings before taxes and before credit losses from Income (loss) before income taxes and discontinued operations (dollars in millions):
6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 3/31/08
Income (loss) before income taxes and discontinued operations $ (211,496) $ (344,056) $ (445,342) $ (501,591) $ (182,411) $ (149,575)
Add back:
(b)
Non-bank (income) loss before tax and discontinued operations 71,731 84,525 76,753 30,225 75,678 81,198
Provision for loan losses 404,525 453,963 512,874 517,800 319,121 233,871
(c)
(Gain) loss on securities, net (73,093) (35,290) (21,961) 141,915 (1,731) (18,533)
Net impairment 29,671 18,783 33,371 17,884 17,153 26,602
(Gain) loss on early extinguishment of FHLB advances 10,356 2,999 - - 48 10,820
Impairment of goodwill - - - - - -
Bank earnings before taxes and before credit losses 231,694 180,924 155,695 206,233 227,858 184,383
(a) Excess risk-based capital is the excess capital that E*TRADE Bank has compared to the regulatory minimum well-capitalized
threshold.
(b) Non-bank loss represents all of the Company’s subsidiaries including Corporate and Brokerage, but excluding the Bank.
(c) (Gain) loss on securities, net is included in the Gain (loss) on loans and securities, net line item on the consolidated statement of
income (loss).
(8) Net usage is calculated by adding the bank earnings and capital release from loan run off and other then subtracting the loan loss provision.
About E*TRADE FINANCIAL

The E*TRADE FINANCIAL family of companies provides financial services including trading, investing and related banking products and services to
retail investors. Securities products and services are offered by E*TRADE Securities LLC (Member FINRA/SIPC). Bank products and services are
offered by E*TRADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries.

E TRADE FINANCIAL Corporation: Business Update September 15, 2009

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E*TRADE FINANCIAL Corporation

© 2009 E*TRADE FINANCIAL Corp. All rights reserved.

This presentation contains certain projections or other forward-

2 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

 Completed major recapitalization

3 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

4 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

 Raised more than $600 million of common equity in Q2

Debt Exchanged $1.7 billion

5 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

Net proceeds from Q2 actions $586

Estimated as of 8/31/09(1) Excess

6 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

Annual Interest Payments

Outstanding Interest-Bearing Debt

7 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

8 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

 Growing and competitive business

9 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

150 161 161

10 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

DARTs Indexed to Q1 2006

11 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

13 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

14 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

15 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

16 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

17 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

Total Operating Expense

$400 17% Decli

$345 $374 $349 $345 $311 $314

18 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

iPhone™ is a trademark of Apple Inc. BlackBerry® is a registered trademark of RIM

19 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

Tools focused on active traders Tools focused on

20 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

21 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

22 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

 Portfolio in full run-off mode

23 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

Loan Loan (4)

1-4 family Loans $16.9 ($4.7) ($0.3) $11.9

Home equity $12.4 ($2.1) ($1.4) $9.0

Consumer $3.0 ($0.8) ($0.1) $2.1

24 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

s Home Equity Unpaid

25 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

Undrawn Home Equity Lines

26 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

27 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

28 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

$566 $636 $874 $1,081 $1,201 $1,219

29 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

Q1 09 ($270) $100 from loan run-off

Q2 09 Net (usage)(8) of ($33)MM

30 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

 Completed major recapitalization

31 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

(4) Represents unpaid principal balances.

Q209 Q109 Q408 Q308 Q208 Q108

33 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

About E*TRADE FINANCIAL

34 © 2009 E*TRADE FINANCIAL Corp. All rights reserved.

Completed major recapitalization

Raised more than $600 million of common equity in Q2

Growing and competitive business

Portfolio in full run-off mode

Completed major recapitalization