Online brokerage firm,
E*TRADE Financial Corporation
) reported a hike in its Daily Average Revenue Trades (DARTs) for
the month of Jan 2013. According to the monthly market activity
report for Jan 2013, E*TRADE's DARTs were 153,580, improving 18%
from Dec 2012 and 6% from Jan 2012, on the back of increased
investments by investors.
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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 0.5 million are banking accounts.
For the reported month, E*TRADE's total brokerage accounts
included 31,286 gross new brokerage accounts and net new
brokerage accounts of 9,127. Moreover, net new brokerage assets
were $1.0 billion, rising from $0.7 billion in the prior-year.
Gross new brokerage accounts and net new brokerage accounts
reflect the company's ability to attract and retain customers who
trade and invest.
During the month, E*TRADE's customer security holdings were
$143.8 billion, up 3.7% from the prior month. Further,
brokerage-related cash moved up marginally by 0.9% from last
month to $34.2 billion, with customers being the net buyers of
about $0.3 billion in securities. Moreover, bank-related cash and
deposits dipped by $0.2 billion from Dec 2012 and ended the month
at $6.9 billion.
As of Dec 31, 2012, DARTs were 128,000, down 1% sequentially. For
full year 2012, DARTs totaled 138,000, down from 157,000 in the
Net new brokerage assets reported were $2.3 billion, up from $1.9
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 10,000 dipped
considerably from the prior quarter's level of 18,000.
Overall, credit quality was mixed during the quarter. E*TRADE's
provision for loan losses dipped 47% to $74.4 million on a
sequential basis. Net charge-offs also declined 36% sequentially
to $102 million. Further, allowance for loan losses declined 5.4%
sequentially to $481 million.
For E*TRADE's entire loan portfolio, special mention
delinquencies increased 5% sequentially, and total at-risk
delinquencies jumped 1% sequentially.
Earlier this week, among E*TRADE's peers,
TD Ameritrade Holding Corporation
) reported a 17% rise in average U.S. trades compared with the
prior month in its Activity Report for the month of Jan 2013.
Moreover, U.S. trades surged 3% on a year-over-year basis to
387,000. For the month, TD Ameritrade reported $499.3 billion in
total client assets, up 17% year over year and 4% from the prior
Moreover, another peer,
Charles Schwab Corp.
) is expected to release its Monthly Activity Report for Jan
2013, later this week.
The competitive position of brokerage business in the market
depends on trading customers, with emphasis on active traders. As
the long-term investing customer group is less developed against
the trading customers, there is scope for future growth whenever
there is an expansion in the long-term customer base.
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 of boosting its trading and
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. Moreover, its expense discipline and
better capital position are impressive and will likely aid the
company navigate through the current cycle.
E*TRADE currently retains a Zacks Rank #3 (Hold). Among peers,
companies in the same industry include
Evercore Partners Inc.
) with a Zacks Rank #1 (Strong Buy).