E*TRADE Financial Corporation
), an online brokerage firm, released its Activity Report for the
month of April 2012, recording a fall in average U.S. trades from
the prior month. Moreover, the trades also dropped from the
For the reported month, Daily Average Revenue Trades (DARTs)
were 145,769, down 7% from March 2012 and 9% year over year. The
fall in DARTs largely resulted from the uncertain economic recovery
and investors' reluctance to invest in the equity markets.
Broker performance is generally measured through the DARTs that
represent the number of trades from which brokers can expect
commissions or fees.
At the end of the month, total number of accounts came in at
approximately 4.4 million, of which, about 2.8 million are
brokerage accounts, 1.1 million are stock plan accounts and 0.5
million are banking accounts.
For the month, total brokerage accounts of E*TRADE included
gross new brokerage accounts of 36,060 and net new brokerage
accounts of 9,305. In April, net new brokerage assets were $0.4
billion, declining from $1.4 billion in the prior month. Total
brokerage accounts and net new brokerage accounts are significanct
of the company's ability to attract and retain trading and
During the month, E*TRADE's customer security holdings were
$138.1 billion, down 0.1% from the prior month. Further,
brokerage-related cash dropped 3.5% from last month to $29.9
billion, while customers were net buyers of approximately $1.6
billion in securities. Bank-related cash and deposits dipped 3.8%
to $7.7 billion in the reported month from $8.0 billion in March
As of March 31, 2012, DARTs were 157,000, up 12% sequentially.
Net new brokerage assets reported were $4.0 billion in the quarter,
significantly up from $1.7 billion in the prior quarter.
E*TRADE's provision for loan losses dropped 42% sequentially to
$71.9 million. Net charge-offs more than doubled to $315.6 from
$120.3 million reported in the prior quarter, while allowance for
loan losses also decreased 29.6% sequentially to $579.2
For E*TRADE's entire loan portfolio, special mention
delinquencies dipped 20% sequentially, and total at-risk
delinquencies slumped 19% sequentially.
E*TRADE further reduced the risks related to its balance sheet.
The company's loan portfolio was $12.4 billion at the end of the
reported quarter, down by $780 million from the prior quarter,
mainly related to $464 million of paydowns.
Earlier this week, among E*TRADE's peers,
The Charles Schwab Corporation
) released its Monthly Activity Report for April 2012, recording an
increase of 5% in DARTs from April 2011 to 458,900. However, the
company's DARTs slipped 1% from the prior month.
Last week, another peer,
TD Ameritrade Holding Corporation
) recorded 8% year-over-year fall in DARTs for April 2012 to
368,000. Moreover, DARTs were also down 3% from the prior month.
However, TD Ameritrade announced $450.9 billion of total client
assets for April-end, up 7% from April 2011 and in line with March
The competitive position of brokerage business in the market
depends on trading customers, predominantly active traders. As the
long-term investing customer group is less developed against the
trading customers, there is an opportunity for future growth
whenever the long-term customers expand.
Development of innovative ways for online trading and long-term
investing products and services, delivery of advanced customer
service, creative and cost-effective marketing and sales, as well
as expense discipline can be considered as key factors in executing
E*TRADE's strategy to boost its trading and investing business.
Furthermore, E*TRADE's initiatives to reduce balance sheet risk
are encouraging, although it may add near-term pressure on the
interest margin. Though the company's capital position and
improving delinquency trends are positive, volatility in global
markets remains a cause of concern.
E*TRADE currently retains a Zacks #3 Rank, which translates into
a short-term 'Hold' rating. Considering the fundamentals, we also
maintain a long-term "Neutral" recommendation on the stock.
TD AMERITRADE (AMTD): Free Stock Analysis
E TRADE FINL CP (ETFC): Free Stock Analysis
SCHWAB(CHAS) (SCHW): Free Stock Analysis Report
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