E Trade Financial (ETFC) 8-K Results of Operations and Financial Condition

Exhibit 99.1

FOR IMMEDIATE RELEASE

E*TRADE FINANCIAL Media Contact

Pam Erickson

E*TRADE FINANCIAL Corporation

617-296-6080

pam.erickson@etrade.com

E*TRADE FINANCIAL Investor Relations Contact

Adam Townsend

E*TRADE FINANCIAL Corporation

703-236-8719

adam.townsend@etrade.com

E*TRADE FINANCIAL CORPORATION RAISES 2004 GUIDANCE AND

REPORTS Q3 EARNINGS OF $0.21 PER SHARE

• Reported third quarter earnings of $0.21 per share on net income of $79.3 million

• Raised 2004 GAAP earnings guidance for the third consecutive quarter to between $0.92 and $0.97 per share from $0.87 to $0.97 per share

• Reported Total Daily Average Revenue Trades of 97,400 in Q3, a decrease of 24 percent quarter over quarter and 27 percent year over year

• Improved bank spread to 213 basis points from 205 basis points in Q204 and 133 basis points in Q303

New York, October 18, 2004 – E*TRADE FINANCIAL Corporation (NYSE: ET) today announced results for its third quarter ended September 30, 2004, reporting net income of $79.3 million, or $0.21 per diluted share, compared to net income of $61.4 million, or $0.17 per share, in the same quarter a year ago. Net revenues totaled $337.1 million, a 13 percent decline over the year ago period.

The Company raised the lower end of its 2004 GAAP earnings guidance, thereby narrowing the range to between $0.92 and $0.97 per share from between $0.87 and $0.97 per share. Based on the $0.75 per share the Company earned through the third quarter, including a $0.07 gain on the sale of E*TRADE Access in the second quarter, the revised guidance implies a fourth quarter earnings range of between $0.17 and $0.22 per share.

“As we continue to achieve greater integration of our trading, investing, banking and lending solutions, we are strengthening our strategic position and increasing our competitive advantage through a differentiated value proposition,” said Mitchell H. Caplan, Chief Executive Officer, E*TRADE FINANCIAL Corporation. “By remaining disciplined and focused, we achieved greater operational efficiencies and delivered strong results in the third quarter, despite the seasonal weakness in the brokerage environment.”

(more)

E*TRADE FINANCIAL Results for the Quarter Ended September 30, 2004

Page 2

Other selected highlights from the third quarter of 2004:

• Completed back office conversion to new ADP processing platform

• Launched comprehensive Exchange-Traded Funds Center

• Swept an additional $800 million of brokerage customer funds to the bank

• Remained lowest cost stock index fund provider for S&P 500 and International index funds

• Repurchased $20 million in common stock at an average weighted cost of $11.19 per share

“As we enter the fourth quarter, there is encouraging evidence that we may have seen the lows in trading activity. Total Daily Average Revenue Trades through the first ten trading days of October equaled 114,200—up 17 percent over September,” said R. Jarrett Lilien, President and Chief Operating Officer, E*TRADE FINANCIAL Corporation. “The increase in trading activity, combined with our ability to achieve greater integration, positions us to create additional value for our customers and shareholders over the long-term.”

Historical monthly metric data from January 2003 to September 2004 can be found on the E*TRADE FINANCIAL investor relations site at www.etrade.com.

About E*TRADE FINANCIAL

The E*TRADE FINANCIAL family of companies provide financial services including brokerage, banking and lending for retail, corporate and institutional customers. Securities products and services are offered by E*TRADE Securities LLC (Member NASD/SIPC). Bank and lending products and services are offered by E*TRADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries.

# # #

Important Notice

E*TRADE FINANCIAL and the E*TRADE FINANCIAL logo is a registered trademark or trademark of E*TRADE FINANCIAL Corporation. The statements contained in this news release that are forward-looking are based on current expectations that are subject to a number of uncertainties and risks, and actual results may differ materially. The uncertainties and risks include, but are not limited to, changes in market activity, anticipated increases in the rate of new customer acquisition, the conversion of new visitors to the site to customers, the activity of customers and assets held at the institution, seasonality, the development and enhancement of products and services, competitive pressures (including price competition), system failures, economic and political conditions, changes in consumer behavior and the introduction of competing products having technological and/or other advantages. Further information about these risks and uncertainties can be found in the information included in the annual reports previously filed by E*TRADE Group, Inc. or E*TRADE FINANCIAL Corporation with the SEC on Form 10-K (including information under the caption “Risk Factors”) and quarterly reports on Form 10-Q.

^© 2004 E*TRADE FINANCIAL Corporation. All rights reserved.

E*TRADE FINANCIAL Results for the Quarter Ended September 30, 2004

Page 3

Financial Statements

Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
Brokerage revenues:
Commissions	$	64,005		$	92,885		$	255,391		$	239,553
Principal transactions		48,212			64,174			185,088			165,024
Other brokerage-related revenues		35,600			46,285			120,555			133,450
Brokerage interest income		42,871			36,883			127,831			106,071
Brokerage interest expense		(4,795	)		(2,442	)		(12,049	)		(6,832	)
Net brokerage revenues		185,893			237,785			676,816			637,266
Banking revenues:
Banking interest income		250,141			176,254			694,753			545,531
Banking interest expense		(124,057	)		(117,481	)		(357,567	)		(356,768	)
Provision for loan losses		(9,145	)		(7,988	)		(25,701	)		(26,149	)
Gain on sales of originated loans		12,917			53,308			61,492			171,728
Gain on sales of loans held-for-sale and securities, net		13,108			32,819			42,061			68,974
Other banking-related revenues		8,280			11,246			26,611			26,947
Net banking revenues		151,244			148,158			441,649			430,263
Total net revenues		337,137			385,943			1,118,465			1,067,529
Expenses excluding interest:
Compensation and benefits		87,264			105,203			286,622			294,910
Occupancy and equipment		19,176			20,527			58,290			65,300
Communications		18,465			19,848			56,000			60,647
Professional services		17,365			16,359			47,401			44,165
Commissions, clearance and floor brokerage		30,894			41,429			116,747			110,125
Advertising and market development		10,232			13,966			49,059			49,366
Servicing and other banking expenses		9,129			9,335			26,579			30,603
Fair value adjustments of financial derivatives		(696	)		998			(2,817	)		15,736
Depreciation and amortization		20,757			20,129			61,826			68,855
Amortization of other intangibles		6,271			6,988			19,967			20,359
Facility restructuring and other exit charges		(231	)		46,998			(1,142	)		125,336
Acquisition-related expenses		62			534			186			2,856
Other		18,682			29,056			65,121			81,390
Total expenses excluding interest		237,370			331,370			783,839			969,648
Income before other income, income taxes and discontinued operations		99,767			54,573			334,626			97,881
Other income:
Corporate interest income		1,698			1,478			4,755			4,981
Corporate interest expense		(11,873	)		(11,395	)		(35,751	)		(34,273	)
Gain on sale and impairment of investments		47,229			40,921			107,506			62,641
Loss on early extinguishment of debt		(18,615	)		—			(22,972	)		—
Equity in income of investments and venture funds		142			2,176			3,206			5,799
Total other income		18,581			33,180			56,744			39,148
Income before income taxes and discontinued operations		118,348			87,753			391,370			137,029
Income tax expense		38,464			25,427			129,467			46,282
Minority interest in subsidiaries		47			43			876			(5,089	)
Income from continuing operations		79,837			62,283			261,027			95,836
Discontinued operations, net of tax:
Income (loss) from discontinued operations		(727	)		(880	)		(1,781	)		(264	)
Gain on disposal of discontinued operations		164			—			31,408			—
Net income (loss) from discontinued operations		(563	)		(880	)		29,627			(264	)
Net income	$	79,274		$	61,403		$	290,654		$	95,572
Basic income per share from continuing operations	$	0.21		$	0.17		$	0.71		$	0.27
Basic income (loss) per share from discontinued operations		(0.00	)		(0.00	)		0.08			(0.00	)
Basic net income per share	$	0.21		$	0.17		$	0.79		$	0.27
Diluted income per share from continuing operations	$	0.21		$	0.17		$	0.68		$	0.26
Diluted income (loss) per share from discontinued operations		(0.00	)		(0.00	)		0.07			(0.00	)
Diluted net income per share	$	0.21		$	0.17		$	0.75		$	0.26
Shares used in computation of per share data:
Basic		369,103			359,432			366,244			356,762
Diluted (1)		380,557			371,173			411,073			364,303

E*TRADE FINANCIAL Results for the Quarter Ended September 30, 2004

Page 4

Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended
	September 30, 2004			June 30, 2004			September 30, 2003
Brokerage revenues:
Commissions	$	64,005		$	79,156		$	92,885
Principal transactions		48,212			67,447			64,174
Other brokerage-related revenues		35,600			41,798			46,285
Brokerage interest income		42,871			43,707			36,883
Brokerage interest expense		(4,795	)		(4,134	)		(2,442	)
Net brokerage revenues		185,893			227,974			237,785
Banking revenues:
Banking interest income		250,141			230,228			176,254
Banking interest expense		(124,057	)		(115,904	)		(117,481	)
Provision for loan losses		(9,145	)		(7,501	)		(7,988	)
Gain on sales of originated loans		12,917			21,475			53,308
Gain on sales of loans held-for-sale and securities, net		13,108			14,891			32,819
Other banking-related revenues		8,280			9,690			11,246
Net banking revenues		151,244			152,879			148,158
Total net revenues		337,137			380,853			385,943
Expenses excluding interest:
Compensation and benefits		87,264			99,896			105,203
Occupancy and equipment		19,176			19,119			20,527
Communications		18,465			18,093			19,848
Professional services		17,365			15,672			16,359
Commissions, clearance and floor brokerage		30,894			41,926			41,429
Advertising and market development		10,232			14,773			13,966
Servicing and other banking expenses		9,129			8,984			9,335
Fair value adjustments of financial derivatives		(696	)		(2,395	)		998
Depreciation and amortization		20,757			20,546			20,129
Amortization of other intangibles		6,271			6,777			6,988
Facility restructuring and other exit charges		(231	)		48			46,998
Acquisition-related expenses		62			62			534
Other		18,682			21,450			29,056
Total expenses excluding interest		237,370			264,951			331,370
Income before other income, income taxes and discontinued operations		99,767			115,902			54,573
Other income:
Corporate interest income		1,698			1,694			1,478
Corporate interest expense		(11,873	)		(12,540	)		(11,395	)
Gain on sale and impairment of investments		47,229			31,728			40,921
Loss on early extinguishment of debt		(18,615	)		(4,357	)		—
Equity in income of investments and venture funds		142			462			2,176
Total other income		18,581			16,987			33,180
Income before income taxes and discontinued operations		118,348			132,889			87,753
Income tax expense		38,464			41,195			25,427
Minority interest in subsidiaries		47			89			43
Income from continuing operations		79,837			91,605			62,283
Discontinued operations, net of tax:
Income (loss) from discontinued operations		(727	)		56			(880	)
Gain on disposal of discontinued operations		164			31,244			—
Net income (loss) from discontinued operations		(563	)		31,300			(880	)
Net income	$	79,274		$	122,905		$	61,403
Basic income per share from continuing operations	$	0.21		$	0.25		$	0.17
Basic income (loss) per share from discontinued operations		(0.00	)		0.09			(0.00	)
Basic net income per share	$	0.21		$	0.34		$	0.17
Diluted income per share from continuing operations	$	0.21		$	0.24		$	0.17
Diluted income (loss) per share from discontinued operations		(0.00	)		0.07			(0.00	)
Diluted net income per share	$	0.21		$	0.31		$	0.17
Shares used in computation of per share data:
Basic		369,103			365,072			359,432
Diluted (1)		380,557			416,713			371,173

E*TRADE FINANCIAL Results for the Quarter Ended September 30, 2004

Page 5

Consolidated Balance Sheets

(dollars in thousands)

(unaudited)

	September 30, 2004			June 30, 2004			December 31, 2003
ASSETS
Cash and equivalents	$	731,370		$	1,243,571		$	921,364
Cash and investments required to be segregated under Federal or other regulations		716,643			1,362,755			1,644,605
Brokerage receivables, net		3,686,285			3,639,541			2,297,778
Trading securities		651,151			776,734			832,889
Available-for-sale mortgage-backed and investment securities		12,051,677			11,630,652			9,826,940
Other investments		41,431			51,043			49,272
Loans receivable, net		10,307,413			9,557,278			8,130,906
Loans held-for-sale, net		597,875			446,297			1,000,487
Property and equipment, net		287,111			284,146			287,097
Goodwill		408,187			392,520			392,845
Other intangibles, net		125,130			115,444			126,032
Net assets from discontinued operations		—			6,899			47,785
Other assets		734,162			734,734			491,216
Total assets	$	30,338,435		$	30,241,614		$	26,049,216
LIABILITIES AND SHAREHOLDERS’ EQUITY
Brokerage payables	$	4,134,294		$	4,710,976		$	3,696,225
Deposits		12,027,025			11,837,898			12,514,486
Securities sold under agreements to repurchase		9,044,660			8,412,010			5,283,609
Other borrowings by Bank subsidiary		1,617,072			1,476,091			1,203,554
Accounts payable, accrued and other liabilities		779,376			712,150			724,681
Net liabilities from discontinued operations		—			45,821			13,037
Convertible subordinated notes		185,165			532,783			695,330
Senior notes		400,000			400,000			—
Total liabilities		28,187,592			28,127,729			24,130,922
Shareholders’ equity:
Preferred stock, shares authorized: 1,000,000; issued and outstanding: none at September 30, 2004, June 30, 2004 and December 31, 2003		—			—			—
Shares exchangeable into common stock, $0.01 par value, shares authorized: 10,644,223; issued and outstanding: 1,326,125 at September 30, 2004 and at June 30, 2004 and 1,386,125 at December 31, 2003		13			13			14
Common stock, $0.01 par value, shares authorized: 600,000,000; issued and outstanding: 372,295,993 at September 30, 2004, 372,503,216 at June 30, 2004 and 366,636,406 at December 31, 2003		3,723			3,725			3,666
Additional paid-in-capital		2,270,445			2,275,745			2,247,930
Deferred stock compensation		(16,889	)		(18,192	)		(12,874	)
Retained earnings (deficit)		60,189			(19,085	)		(230,465	)
Accumulated other comprehensive loss		(166,638	)		(128,321	)		(89,977	)
Total shareholders’ equity		2,150,843			2,113,885			1,918,294
Total liabilities and shareholders’ equity	$	30,338,435		$	30,241,614		$	26,049,216

E*TRADE FINANCIALResults for the Quarter Ended September 30, 2004

Page 6

Segment Reporting

	Three Months Ended September 30, 2004
	Brokerage			Banking			Elimination (2)			Total
Net Revenues:
Commissions	$	64,005		$	—		$	—		$	64,005
Principal transactions		48,212			—			—			48,212
Interest income		42,871			250,141			—			293,012
Interest expense		(4,795	)		(124,057	)		—			(128,852	)
Gain on sales of originated loans		—			12,917			—			12,917
Gain on sales of loans held-for-sale and securities, net		—			13,108			—			13,108
Provision for loan losses		—			(9,145	)		—			(9,145	)
Other revenues		48,541			8,280			(12,941	)		43,880
Net revenues		198,834			151,244			(12,941	)		337,137
Expenses excluding interest:
Compensation and benefits		55,892			31,372			—			87,264
Occupancy and equipment		12,604			6,572			—			19,176
Communications		16,628			1,837			—			18,465
Professional services		10,820			6,545			—			17,365
Commissions, clearing and floor brokerage		30,890			4			—			30,894
Advertising and market development		5,376			17,797			(12,941	)		10,232
Servicing and other banking expenses		—			9,129			—			9,129
Fair value adjustments of financial derivatives		—			(696	)		—			(696	)
Depreciation and amortization		16,313			4,444			—			20,757
Amortization of other intangibles		4,021			2,250			—			6,271
Restructuring and other exit charges		(227	)		(4	)		—			(231	)
Acquisition-related expenses		—			62			—			62
Other		9,332			9,350			—			18,682
Total expenses excluding interest		161,649			88,662			(12,941	)		237,370
Income before other corporate items	$	37,185		$	62,582		$	—		$	99,767
	Three Months Ended June 30, 2004
	Brokerage			Banking			Elimination (2)			Total
Net Revenues:
Commissions	$	79,156		$	—		$	—		$	79,156
Principal transactions		67,447			—			—			67,447
Interest income		43,707			230,228			—			273,935
Interest expense		(4,134	)		(115,904	)		—			(120,038	)
Gain on sales of originated loans		—			21,475			—			21,475
Gain on sales of loans held-for-sale and securities, net		—			14,891			—			14,891
Provision for loan losses		—			(7,501	)		—			(7,501	)
Other revenues		53,163			9,690			(11,365	)		51,488
Net revenues		239,339			152,879			(11,365	)		380,853
Expenses excluding interest:
Compensation and benefits		62,212			37,684			—			99,896
Occupancy and equipment		12,763			6,356			—			19,119
Communications		16,785			1,308			—			18,093
Professional services		8,033			7,639			—			15,672
Commissions, clearing and floor brokerage		41,925			1			—			41,926
Advertising and market development		8,814			17,324			(11,365	)		14,773
Servicing and other banking expenses		(68	)		9,052			—			8,984
Fair value adjustments of financial derivatives		—			(2,395	)		—			(2,395	)
Depreciation and amortization		15,332			5,214			—			20,546
Amortization of other intangibles		4,949			1,828			—			6,777
Restructuring and other exit charges		(27	)		75			—			48
Acquisition-related expenses		—			62			—			62
Other		11,898			9,552			—			21,450
Total expenses excluding interest		182,616			93,700			(11,365	)		264,951
Income before other corporate items	$	56,723		$	59,179		$	—		$	115,902

E*TRADE FINANCIAL Results for the Quarter Ended September 30, 2004

Page 7

	Three Months Ended September 30, 2003
	Brokerage			Banking			Elimination (2)			Total
Net Revenues:
Commissions	$	92,885		$	—		$	—		$	92,885
Principal transactions		64,174			—			—			64,174
Interest income		36,883			176,254			—			213,137
Interest expense		(2,442	)		(117,481	)		—			(119,923	)
Gain on sales of originated loans		—			53,308			—			53,308
Gain on sales of loans held-for-sale and securities, net		—			32,819			—			32,819
Provision for loan losses		—			(7,988	)		—			(7,988	)
Other revenues		47,334			11,246			(1,049	)		57,531
Net revenues		238,834			148,158			(1,049	)		385,943
Expenses excluding interest:
Compensation and benefits		64,025			41,178			—			105,203
Occupancy and equipment		14,350			6,177			—			20,527
Communications		18,431			1,417			—			19,848
Professional services		8,851			7,508			—			16,359
Commissions, clearing and floor brokerage		41,425			4			—			41,429
Advertising and market development		4,617			10,398			(1,049	)		13,966
Servicing and other banking expenses		101			9,234			—			9,335
Fair value adjustments of financial derivatives		—			998			—			998
Depreciation and amortization		15,495			4,634			—			20,129
Amortization of other intangibles		4,445			2,543			—			6,988
Restructuring and other exit charges		30,505			16,493			—			46,998
Acquisition-related expenses		472			62			—			534
Other		13,628			15,428			—			29,056
Total expenses excluding interest		216,345			116,074			(1,049	)		331,370
Income before other corporate items	$	22,489		$	32,084		$	—		$	54,573

E*TRADE FINANCIAL Results for the Quarter Ended September 30, 2004

Page 8

Key Performance Metrics⁽³⁾

CORPORATE METRICS	Qtr ended 9/30/04			Qtr ended 6/30/04			Qtr ended 9/30/04 vs. Qtr ended 6/30/04		Qtr ended 9/30/03			Qtr ended 9/30/04 vs. Qtr ended 9/30/03
Operating margin (4) %
Consolidated		30	%		30	%	0	%		14	%	16	%
Brokerage		19	%		24	%	(5	)%		9	%	10	%
Bank		41	%		39	%	2	%		22	%	19	%
Employees		3,325			3,394		(2	)%		3,528		(6	)%
Consultants and other		443			419		6	%		382		16	%
Total headcount		3,768			3,813		(1	)%		3,910		(4	)%
Revenue per headcount	$	89,474		$	99,883		(10	)%	$	98,707		(9	)%
Revenue per compensation and benefits dollar	$	3.86		$	3.81		1	%	$	3.67		5	%
Book value per share	$	5.75		$	5.65		2	%	$	4.68		23	%
Tangible book value per share	$	4.33		$	4.30		1	%	$	3.12		39	%
Cash & equivalents ($MM)	$	731.4		$	1,243.6		(41	)%	$	990.2		(26	)%
Free cash ($MM)	$	713.0		$	717.0		(1	)%	$	530.1		35	%
Earnings before interest, taxes, depreciation & amortization ($MM)
Net income from continuing operations	$	79.8		$	91.6		(13	)%	$	62.3		28	%
Tax expense		38.5			41.2		(7	)%		25.4		51	%
Depreciation & amortization		27.0			27.3		(1	)%		27.1		0	%
Corporate interest expense		11.9			12.5		(5	)%		11.4		4	%
EBITDA	$	157.2		$	172.7		(9	)%	$	126.2		25	%
Interest coverage		13.2			13.8		(4	)%		11.1		20	%
Active retail brokerage accounts		2,895,106			2,901,140		0	%		2,854,900		1	%
Active banking accounts		632,328			627,567		1	%		657,646		(4	)%
Total active accounts end of period		3,527,434			3,528,707		0	%		3,512,546		0	%
Total customer households end of period		2,703,373			2,699,857		0	%		2,678,409		1	%
Gross new accounts		166,868			168,519		N.M.			169,593		N.M.
Inactive accounts		(103,090	)		(98,052	)	N.M.			(128,002	)	N.M.
Customer closed accounts		(65,051	)		(65,436	)	N.M.			(73,038	)	N.M.
Net new accounts		(1,273	)		5,031		N.M.			(31,447	)	N.M.
Net new households		3,516			1,906		N.M.			68,673		N.M.
Total client assets in investing accounts ($B)	$	71.4		$	76.9		(7	)%	$	60.3		18	%
Total deposits in banking accounts ($B)		12.0			11.8		2	%		11.5		4	%
Total assets / deposits in customer accounts ($B)	$	83.4		$	88.7		(6	)%	$	71.8		16	%
Average assets per household	$	30,860		$	32,869		(6	)%	$	26,809		15	%

E*TRADE FINANCIAL Results for the Quarter Ended September 30, 2004

Page 9

BROKERAGE METRICS	Qtr ended 9/30/04			Qtr ended 6/30/04			Qtr ended 9/30/04 vs. Qtr ended 6/30/04		Qtr ended 9/30/03			Qtr ended 9/30/04 vs. Qtr ended 9/30/03
Trading days		64.0			62.0		N.M.			63.5		N.M.
Daily Average Revenue Trades (DARTs)
Total Retail		62,771			79,675		(21	)%		84,229		(25	)%
- US		53,050			69,073		(23	)%		75,605		(30	)%
- International		9,721			10,602		(8	)%		8,624		13	%
Professional		34,633			47,758		(27	)%		48,332		(28	)%
Total DARTs		97,404			127,433		(24	)%		132,561		(27	)%
Total revenue trades (MM)		6.2			7.9		(21	)%		8.4		(26	)%
Average commission per revenue trade	$	10.27		$	10.02		2	%	$	11.03		(7	)%
Market Making
Equity shares traded (MM)		65,037			89,792		(28	)%		18,460		252	%
Average revenue capture per 1,000 equity shares	$	0.234		$	0.274		(14	)%	$	1.167		(80	)%
% of Bulletin Board equity shares to total equity shares		95.4	%		96.1	%	(1	)%		77.2	%	18	%
End of period margin debt ($B)	$	2.04		$	2.07		(1	)%	$	1.45		40	%
Average margin debt ($B)	$	2.04		$	2.13		(4	)%	$	1.24		65	%
Active retail brokerage accounts		2,895,106			2,901,140		0	%		2,854,900		1	%
Gross new brokerage accounts		105,870			130,793		N.M.			127,384		N.M.
Inactive accounts		(103,090	)		(98,052	)	N.M.			(129,963	)	N.M.
Customer closed accounts		(8,814	)		(12,037	)	N.M.			(13,206	)	N.M.
Net new brokerage accounts		(6,034	)		20,704		N.M.			(15,785	)	N.M.
New client assets ($MM)	$	2,717		$	3,846		(29	)%	$	2,385		14	%
Client asset outflow from closed accounts ($MM)		(410	)		(492	)	17	%		(410	)	0	%
Net new client assets ($MM)	$	2,307		$	3,354		(31	)%	$	1,975		17	%
Total Client Assets ($B)
Security holdings	$	45.8		$	47.7		(4	)%	$	38.0		21	%
Cash (including money market funds)		4.7			5.7		(18	)%		7.6		(38	)%
Unexercised options (vested)		20.9			23.5		(11	)%		14.7		42	%
Total client assets in investing accounts	$	71.4		$	76.9		(7	)%	$	60.3		18	%
Total client assets per active account	$	24,662		$	26,508		(7	)%	$	21,122		17	%
Unexercised options (unvested) ($B)	$	13.9		$	17.1		(19	)%	$	10.8		29	%

E*TRADE FINANCIAL Results for the Quarter Ended September 30, 2004

Page10

BANKING METRICS	Qtr ended 9/30/04			Qtr ended 6/30/04			Qtr ended 9/30/04 vs. Qtr ended 6/30/04		Qtr ended 9/30/03			Qtr ended 9/30/04 vs. Qtr ended 9/30/03
Gross new banking accounts		60,998			37,726		N.M.			42,209		N.M.
Inactive accounts		—			—		N.M.			1,961		N.M.
Customer closed accounts		(56,237	)		(53,399	)	N.M.			(59,832	)	N.M.
Net new banking accounts		4,761			(15,673	)	N.M.			(15,662	)	N.M.
Direct mortgage originations ($B)	$	0.6		$	1.3		(50	)%	$	2.4		(73	)%
Correspondent mortgage originations ($B)	$	0.6		$	1.7		(65	)%	$	1.7		(65	)%
Consumer loan originations, incl HELOCs ($B)	$	0.6		$	0.8		(26	)%	$	0.7		(19	)%
Acquired consumer loans ($B)	$	1.1		$	0.2		430	%	$	—		N.M.
Mortgage pipeline (end of period) ($B)	$	0.4		$	0.3		31	%	$	0.5		(20	)%
Bank Asset Portfolio Detail ($MM)
Cash & equivalents	$	41		$	260		(84	)%	$	383		(89	)%
Trading securities		625			764		(18	)%		774		(19	)%
Investment securities, available-for-sale		3,251			3,029		7	%		2,094		55	%
Mortgage securities, available-for-sale		8,658			8,406		3	%		6,972		24	%
Loans receivable, net including loans held-for-sale:
- Mortgage and home equity loans, net		6,468			5,713		13	%		3,207		102	%
- Consumer loans, net		4,437			4,290		3	%		4,314		3	%
- Other		—			1		N.M.			1		N.M.
Other assets		710			736		(4	)%		643		10	%
Total assets	$	24,190		$	23,199		4	%	$	18,388		32	%
Bank Deposit Portfolio Detail ($MM)
Transaction accounts	$	9,448		$	8,929		6	%	$	7,546		25	%
CDs		2,579			2,909		(11	)%		3,988	��	(35	)%
Total	$	12,027		$	11,838		2	%	$	11,534		4	%
Bank interest rate spread (basis points)		213			205		4	%		133		60	%
Credit Quality and Reserve Metrics
Net charge-offs as a % of average held-for-investment loans, net (annualized)		0.35	%		0.29	%	0.06	%		0.44	%	(0.09	)%
Provision as a % of average held-for-investment loans, net (annualized)		0.37	%		0.34	%	0.03	%		0.51	%	(0.14	)%
Allowance as a % of total ending gross held-for-investment loans		0.41	%		0.43	%	(0.02	)%		0.50	%	(0.09	)%
Total non-performing loans, net, as a % of total gross held-for-investment loans		0.17	%		0.18	%	(0.01	)%		0.32	%	(0.15	)%
Total loan loss allowance as a % of total non-performing loans, net		240	%		232	%	8	%		156	%	84	%
Tier 1 Capital Ratio(5)		5.94	%		5.98	%	(0.04	)%		6.16	%	(0.22	)%
Risk Weighted Capital Ratio(5)		11.24	%		11.81	%	(0.57	)%		12.50	%	(1.26	)%

E*TRADE FINANCIALResults for the Quarter Ended September 30, 2004

Page 11

Activity in Allowance for Loan Losses

	Three Months Ending September 30, 2004
	Mortgage			Consumer			Total
	(in thousands)
Allowance for loan losses, ending 6/30/04	$	10,639		$	30,299		$	40,938
Purchase Reserve		—			1,548			1,548
Provision for loan losses		2,765			6,380			9,145
Charge-offs, net		(365	)		(8,372	)		(8,737	)
Allowance for loan losses, ending 9/30/04	$	13,039		$	29,855		$	42,894

Bank Average Balance Data

	Three Months Ended September 30, 2004						Three Months Ended September 30, 2003
	Average Balance		Interest Income/ Expense		Average Annualized Yield/Cost		Average Balance		Interest Income/ Expense		Average Annualized Yield/Cost
	(in thousands)
Interest-earning banking assets:
Loans receivable, net	$	10,305,473	$	124,835	4.85	%	$	7,431,318	$	85,768	4.62	%
Interest-bearing deposits		110,136		963	3.48	%		337,595		1,573	1.85	%
Mortgage-backed and related available-for-sale securities		8,579,174		86,137	4.02	%		6,545,038		63,462	3.88	%
Available-for-sale investment securities		3,314,544		33,981	4.10	%		2,033,425		22,118	4.35	%
Investment in FHLB stock		100,460		882	3.49	%		79,236		649	3.25	%
Trading securities		681,326		5,528	3.24	%		410,976		3,244	3.16	%
Total interest-earning banking assets (6)		23,091,113	$	252,326	4.37	%		16,837,588	$	176,814	4.20	%
Non-interest-earning banking assets		419,246						933,232
Total banking assets	$	23,510,359					$	17,770,820
Interest-bearing banking liabilities:
Retail deposits	$	11,516,741	$	41,042	1.42	%	$	9,032,367	$	62,975	2.77	%
Brokered certificates of deposit		378,241		2,381	2.50	%		345,357		2,175	2.50	%
FHLB advances		1,117,619		12,732	4.46	%		849,147		11,661	5.37	%
Other borrowings		9,038,526		67,902	2.94	%		5,983,488		40,670	2.66	%
Total interest-bearing banking liabilities		22,051,127	$	124,057	2.24	%		16,210,359	$	117,481	2.87	%
Non-interest bearing banking liabilities		346,631						605,868
Total banking liabilities		22,397,758						16,816,227
Total banking shareholder’s equity		1,112,601						954,593
Total banking liabilities and shareholder’s equity	$	23,510,359					$	17,770,820
Excess of interest-earning banking assets over interest-bearing banking liabilities/net interest income	$	1,039,986					$	627,229
Net interest spread			$	128,269	2.13	%			$	59,333	1.33	%

E*TRADE FINANCIAL Results for the Quarter Ended September 30, 2004

Page 12

SUPPLEMENTAL INFORMATION AND ENDNOTES

Explanation of Non-GAAP Measures and Certain Metrics

In order to better assess the Company’s financial operating results, management believes operating margins, free cash, EBITDA and interest coverage are appropriate measures of evaluating the operating and liquidity performance of the Company.

Free Cash, EBITDA and Interest Coverage

Free cash as reported by the Company represents cash held at Parent and non-Bank or Brokerage subsidiaries less discretionary reserves and excess capital at Bank and Brokerage after regulatory capital requirements and the Company’s own regulatory capital guidelines. The Company believes that free cash is a useful measure of the Company’s liquidity as it excludes cash reflected on the balance sheet that may not be freely available to the Company.

Additionally, management utilizes EBITDA and interest coverage to measure business performance. EBITDA is defined as net income (loss) from continuing operations before corporate interest expense, taxes and depreciation & amortization. Interest coverage is defined as EBITDA divided by corporate interest expense.

It is important to note these metrics and other non-GAAP measures may involve judgment by management and should be considered in addition to, not as a substitute for, or superior to, net income, consolidated statements of cash flows, or other measures of financial performance prepared in accordance with GAAP.

(1) For the three months ended June 30, 2004 and the nine months ended September 30, 2004, diluted earnings per share is calculated using the ‘if converted’ method, which includes the additional dilutive impact assuming conversion of the Company’s subordinated convertible debt. Under the ‘if converted’ method the per share numerator excludes the interest expense and related amortization of offering costs from the convertible debt, net of tax, of $7.4 million for the three months ended June 30, 2004, and $17.5 million for the nine months ended September 30, 2004. The denominator includes the shares issuable from the assumed conversion of the convertible debt of 39.9 million for the three months ended June 30, 2004 and 31.8 million for the nine months ended September 30, 2004. For all other periods presented the ‘if converted’ method is not used as its effect would be anti-dilutive.

(2) Eliminates intercompany payment made by Bank to Brokerage related to Sweep Deposit Account (SDA) relationships, swept daily from Brokerage to Bank, which began in the third quarter of 2003. Under this relationship, Bank pays Brokerage a negotiated rate that approximates market on the average SDA balance. Bank reflects this payment as advertising and market development expense and Brokerage reflects this payment as other revenues.

(3) Amounts and percentages may not calculate due to rounding.

(4) Consolidated operating margin is defined as income before other income, income taxes and discontinued operations divided by net revenues. Operating margin for Brokerage and Bank is based on segment results.

(5) Q304 estimate.

E*TRADE FINANCIAL Results for the Quarter Ended September 30, 2004

Page 13

(6) Amounts include a taxable equivalent increase in interest income of $2.2 million for the three months ended September 30, 2004 and $0.6 million for the three months ended September 30, 2003.