Online broker E*TRADE Financial Corporation (ETFC) released its Monthly Activity Report for April 2011 on Monday, recording a sequential as well as year-over-year decline in average U.S. trades.
For the month of April 2011, Daily Average Revenue Trades (DARTs) were 160,907, down 4% sequentially and 11% year over year. Broker performance is generally measured through DARTs. DARTs represent a number of trades from which brokers can expect commissions or fees.
At the end of the month, total accounts were approximately 4.3 million, including approximately 2.8 million brokerage accounts, 1.1 million stock plan accounts and 0.5 million banking accounts.
Total brokerage accounts of E*TRADE include gross new brokerage accounts of 42,421 and net new brokerage accounts of 17,849 during the month. In April, net new brokerage assets were $0.8 billion. Total brokerage accounts and net new brokerage accounts indicate the company’s ability to attract and retain trading and investing customers.
During the month, E*TRADE’s customer security holdings were $133.8 billion, up 3% sequentially. Further, brokerage-related cash inched up 1.9% sequentially to $26.4 billion, while customers were net sellers of approximately $0.3 billion in securities in April. Bank-related cash and deposits plummeted 2.3% sequentially to $8.6 billion in the reported month.
Last week, E*TRADE’s closest competitor – Charles Schwab Corp. (SCHW) released its Monthly Activity Report for April 2011, recording net outflows of $0.5 billion in net new assets as the customers withdrew money to pay income taxes. Schwab reported opening of 83,000 brokerage accounts in April 2011. This was higher than 82,000 registered in March but lower than 89,000 recorded in April 2010. Schwab also reported a slow down in trading activity in April. The company’s daily average trades were 435,000 in April, flat with the prior month while declining 1% year over year.
Earnings Recap
In April, E*TRADE reported first-quarter 2011 net income of 16 cents per share, ahead of the Zacks Consensus Estimate of 12 cents, on the back of operating net revenue, strong brokerage business, decrease in provision for loan losses and improved expense management. The income also compares favorably with loss of 11 cents and 25 cents per share in the prior quarter and prior-year quarter, respectively.
Our Take
E*TRADE’sinitiatives to reduce balance sheet risk are encouraging, but it will add near-term pressure on interest margin. Though the company’s capital position and restructuring initiatives are promising, increasing operating expenses can have an adverse impact on the bottom line.
E*TRADE currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Also, considering the fundamentals, we maintain a long-term ‘Neutral’ recommendation on the stock.
E TRADE FINL CP (ETFC): Free Stock Analysis Report
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