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Online brokerage firm, E*TRADE Financial Corporation (ETFC - Analyst Report) reported an upsurge in its Daily Average Revenue Trades (DARTs) for Nov 2013. According to the monthly market activity report for November, E*TRADE’s DARTs were 163,411, up 2% from Oct 2013. Moreover, DARTs increased 26% on a year-over-year basis.

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 4.6 million, of which about 3.0 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 29,355 gross new brokerage accounts. Moreover, E*TRADE’s net new brokerage assets were $1.3 million, increasing from $1.0 billion in the prior month. Total brokerage accounts reflect the company’s ability to attract and retain customers who trade and invest.

As of November-end, E*TRADE’s customer security holdings were $174.4 billion, up 3.0% from the prior month. The company’s brokerage-related cash increased $0.7 billion to $39.3 billion, with customers being the net buyers of about $0.3 billion in securities. Moreover, bank-related cash and deposits for the company stood at $6.4 billion, unchanged from the prior month.

Total special delinquencies (30 to 89 days delinquent) decreased 1% from Sep 2013 and 7% from the prior month to $276 million in E*TRADE’s entire loan portfolio. Total delinquencies (30 to 179 days delinquent) declined 1% from Sep 2013 and 5% from the prior month to $388 million.

Peers Performance

Last week, another brokerage firm, TD Ameritrade Holding Corporation (AMTD - Analyst Report) reported a 1% fall in average client trades compared with the prior month in its Activity Report for Nov 2013. However, average client trades surged 22% on a year-over-year basis to 416,000.

Another firm, The Charles Schwab Corporation (SCHW - Analyst Report) reported its monthly metrics for Nov 2013. The company reported Daily Average Trades (DATs) of 467,300. This marked a decrease of 5% from 490,800 in the prior month. However, it was 8% higher than 431,800 in the year-ago month.

Our Viewpoint

Amid the challenging economy, increase in DARTs and new brokerage accounts will be beneficial for the company. 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 #3 (Hold). The better performing stock in the same industry includes Ladenburg Thalmann Financial Services Inc. (LTS - Snapshot Report) with a Zacks Rank #1 (Strong Buy).

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