expects togrow its assets to more than $50 billion during the first part of 2017, having balancedgrowth prospects against added regulatorycosts.
The companyended the second quarter with assets of $49.20 billion. With the combination of$2 billion of off-balance-sheet deposits and an expected conversion in Septemberof $4 billion in money market funds to its cash sweep program, E*TRADE expects tosurpass the asset threshold, CEO Paul Idzik said during a conference call to discussearnings.Conditions have made money market funds a "suboptimal sweep vehicle" forcustomers, he said.
The companyneeded some combination of higher interest rates or the right level of depositsto allow it to move across the $50 billion threshold and its elevated regulatorycosts. With higher rates increasingly unlikely, the bank opted for a decisive movewith deposits, which Idzik dubbed the "Pizzi pounce."
The companyestimates $50 million in costs related to the build-out, with $5 million to be incurredduring the second half of 2016, CFO Michael Pizzi said. The rest of the costs willbe divided evenly between 2017 and 2018, with an annualized expense of about $15million beginning in 2017.
"Needlessto say, with the right amount of deposits at our disposal, the returns are quitecompelling, and we are excited to unshackle our growth," Pizzi said.