E-Trade (
ETFC
) is a financial services company that provides online brokerage
and related products and services to individual retail investors
under the brand "E*TRADE Financial." The company also provides
investor-focused banking products, primarily sweep deposits and
savings products, to retail investors. It competes with firms like
Charles Schwab Corporation
(
SCHW
), Ameritrade (
AMTD
),
Wells Fargo
(
WFC
) and Bank of America (
BAC
).
We have launched coverage on E-Trade with an
$18.87
price estimate for the company's stock, a premium of about 5% to
market price.
Launch of Coverage on ETFC; $18.87 Price
Estimate
We have broken down our analysis of E-Trade into three
divisions:
- Net Interest on Assets
- Trading Commissions
- Principal Transactions, Fees & Others
E-Trade at a Glance
E-Trade provides various financial services to its customers
through the following subsidiaries:
- E-Trade Bank provides investor-focused banking products and
deposit accounts insured by the Federal Deposit Insurance
Corporation (FDIC).
- E-Trade Securities LLC provides brokerage services to
customers.
- E-Trade Clearing LLC is the clearing arm responsible for the
transfer of securities between parties.
The company provides a variety of trading products and services,
including the ability to trade stocks and transfer funds between
accounts through mobile phones, as well as access to various
international equities and foreign currencies. It also has a range
of long-term investing products and services, including advisory
& retirement solutions, and access to more than 1,000
non-proprietary exchange-traded funds and over 8,000
non-proprietary mutual funds.
E-Trade's Advantage in the Online Brokerage
Industry
Online brokerage firms compete on various aspects including
commissions & fees, types of investment products offered,
research & advice for investors and customer service. E-Trade
has been able to establish a competitive edge by offering its
customers banking solutions along with their brokerage
services.
With more and more online brokerage firms trying to provide
end-to-end financial services to their customers with facilities
like online bill payment and debit card services, E-Trade has
managed to remain a front-runner in this sector and consistently
attract new customers.
See our full analysis and $18.87 price estimate for E-Trade
Net Interest earned on assets
contributes to almost two-thirds of E-Trade's equity value by our
estimates. E-Trade's interest earning assets were at their peak in
mid-2007, with a value of more than $56 billion. The firm suffered
significant losses during the global economic recession that
followed, starting with the costly divestiture deal with the
Citadel Investment Group in late 2007 to offload its subprime
portfolio.
We believe that E-Trade's interest earning assets will increase
by about 5% annually in the years to come. With the company's net
yield expected to increase from its current value of 3% to 4% in
the next few years, the expected interest income accounts for the
majority of E-Trade's stock value.