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Online brokerage firm E*TRADE Financial Corporation (ETFC - Analyst Report)) reported an uptick in its Daily Average Revenue Trades (DARTs) for Jan 2014. According to the monthly market activity report for January, E*TRADE’s DARTs were 195,652, up 26% from Dec 2013. Moreover, DARTs increased 27% 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.

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 41,367 gross new brokerage accounts. Moreover, E*TRADE’s net new brokerage assets were $1.0 billion, increasing from $0.9 billion in the prior month. Total brokerage accounts reflect the company’s ability to attract and retain customers who trade and invest.

As of January end, E*TRADE’s customer security holdings were $176.4 billion, down 1.0% from the prior month. The company’s brokerage-related cash decreased $0.8 billion to $38.9 billion, with customers being the net buyers of about $2.3 billion in securities. Moreover, bank-related cash and deposits for the company stood at $6.3 billion, down from $6.4 billion in the prior month.

Peers Performance

TD Ameritrade Holding Corp’s (AMTD - Analyst Report) average client trades per day of 496,000 marked a 22% increase compared with the prior month in its Activity Report for Jan 2014. Further, client trades increased 28% on a year-over-year basis.

Another sector participant The Charles Schwab Corp. (SCHW - Analyst Report) reported average client trades of 588,200, representing a 17% increase compared with the prior month as well as the prior-year period in its Activity Report for Jan 2014.

Our Viewpoint

Amid the challenging economy, increase in DARTs and new brokerage accounts will be beneficial for E*TRADE. Further, the company’s initiatives to reduce balance sheet risk appear to be promising, although they will put near-term pressure on the net interest margin. 

We remain concerned about the sluggish macroeconomic environment, which might lead to lower trading activities. Moreover, mounting expenses and fluctuating interest rates are expected to continuously impact the company’s financials in the near term.

E*TRADE currently carries a Zacks Rank #2 (Buy). Investment Technology Group Inc. (ITG - Snapshot Report) is a better-ranked stock in the same industry with a Zacks Rank #1 (Strong Buy).

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