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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 Jul 2014. According to the monthly market activity report for July, E*TRADE’s DARTs were 153,671, up 5% from the prior month and 9% on a year-over-year basis.

Broker performance is generally measured through DARTs that represent the number of trades from which brokers can expect commissions or fees. The rise in DARTs largely resulted from the gradual economic recovery and investors’ keenness 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 4.7 million, of which about 3.1 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 29,655 gross new brokerage accounts. Moreover, E*TRADE’s net new brokerage assets were $0.4 billion, decreasing from $0.5 billion in the prior month. Total brokerage accounts reflect the company’s ability to attract and retain customers who trade and invest.

As of July-end, E*TRADE’s customer security holdings were $195.5 billion, down 1.2% from the prior month. The company’s brokerage-related cash remained flat at $40 billion, with customers being the net buyers of about $0.7 billion in securities. Moreover, bank-related cash and deposits for the company stood at $5.9 billion, down $0.1 billion from the prior month.

Peers Performance

Concurrently, another firm, The Charles Schwab Corp. (SCHW - Analyst Report) reported its monthly metrics for Jul 2014. The company reported Daily Average Trades (DATs) of 458,000. This marked a decrease of 2% from the prior month and 8% from the year-ago month.

Last week, another brokerage firm, TD Ameritrade Holding Corp. (AMTD - Analyst Report) came out with its average client trades per day of 405,000 in its activity report for Jul 2014. This figure increased 8% from the prior month and 9% year over year.

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 is impressive and will likely aid it to navigate through the current cycle.

E*TRADE currently carries a Zacks Rank #3 (Hold). A better performing stock in the same industry includes Piper Jaffray Companies (PJC - Snapshot Report) with a Zacks Rank #1 (Strong Buy).

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