Online brokerage firm,
E*TRADE Financial Corporation
) reported a surge in its Daily Average Revenue Trades (DARTs)
for the month of Apr 2013. According to the monthly market
activity report for Apr, E*TRADE's DARTs were 141,255, rising 1%
from Mar 2013. However, DARTs declined 3% on a year-over-year
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Broker performance is generally measured through the DARTs that
represent the number of trades from which brokers can expect
commissions or fees. The fall in DARTs largely resulted from the
uncertain economic recovery and investors' reluctance to invest
in the equity markets.
At the end of the month under review, E*TRADE's total number of
accounts came in at approximately 4.5 million, of which about 2.9
million are brokerage accounts, 1.2 million are stock plan
accounts and 0.4 million are banking accounts.
For the reported month, E*TRADE's total brokerage accounts
included 33,090 gross new brokerage accounts and net new
brokerage accounts of 6,534. Moreover, E*TRADE's net new
brokerage assets were $5 million, plummeting from $1.2 billion in
the prior month. Total brokerage accounts and net new brokerage
accounts reflect the company's ability to attract and retain
customers who trade and invest.
As of April-end, E*TRADE's customer security holdings were $151.7
billion, up 1.5% from the prior month. However, E*TRADE's
brokerage-related cash decreased 0.9% from the prior month and
stood at $34.4 billion, with customers being the net sellers of
about $20 million in securities. Moreover, bank-related cash and
deposits for the company dipped by $0.3 billion, ending the month
at $6.7 billion.
As of Mar 31, 2013, DARTs were 149,000, up 16% sequentially. Net
new brokerage assets reported were $3.1 billion, up from $2.3
billion in the prior quarter. At the end of the quarter, E*TRADE
reported 4.5 million customer accounts, including 2.9 million
brokerage accounts. Net new brokerage accounts of 30,000 surged
considerably from the prior-quarter level of 10,000.
Overall, credit quality improved during the quarter. E*TRADE's
provision for loan losses dipped 42% to $43 million on a
sequential basis. Net charge-offs also declined 33% sequentially
to $68 million. Further, allowance for loan losses declined 5.4%
sequentially to $455 million.
For E*TRADE's entire loan portfolio, special mention
delinquencies decreased 9% sequentially, while total at-risk
delinquencies also moved down sequentially by 8%.
Performance by Other Brokerage Firms
TD Ameritrade Holding Corporation
) reported a 4% rise in average client trades compared with the
prior month in its Activity Report for the month of Apr 2013.
Moreover, average client trades surged 6% on a year-over-year
basis to 383,000. For the month, TD Ameritrade reported $524.4
billion in total client assets, up 16% year over year and 1% from
the prior month.
Earlier this week, in its monthly market activity report for Apr
The Charles Schwab Corporation
) reported Daily Average Trades (DATs) of 470,000. The DATs were
up 2% from 458,900 in the year-ago month but down 3% from 486,000
in the prior month.
Amid the challenging economy, rising DARTs and new brokerage
accounts will be beneficial to the company. However, we remain
concerned about the sluggish macroeconomic environment, which
might lead to lower trading activities. Moreover, fluctuating
interest rates are expected to continuously impact the company's
financials in the near term.
However, E*TRADE's initiatives to reduce balance sheet risk
appear to be promising, although they will put near-term pressure
on the net interest margin. The company's strong capital position
and decreasing delinquencies are impressive and will likely aid
it to navigate through the current cycle.
E*TRADE currently carries a Zacks Rank #4 (Sell). The better
performing stock in the same industry includes
LPL Financial Holdings Inc.
) with a Zacks Rank #1 (Strong Buy).