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Analyst Blog

E*TRADE Financial Corporation (ETFC - Free Report) reported a rise in its Daily Average Revenue Trades (DARTs) in the monthly market activity report for Oct 2016. According to the report, E*TRADE’s DARTs were 168,739, up 2% from the prior month and 17% on a year-over-year basis.

Broker performance is generally measured through DARTs that represent the number of trades from which brokers can expect commission or fees. The increase in DARTs largely reflects investors’ willingness in investing in equity markets.

At the end of the month under review, E*TRADE’s total number of accounts were approximately 5.2 million, which comprised about 3.4 million brokerage accounts, 1.5 million stock plan accounts and 0.32 million banking accounts.

For the reported month, E*TRADE’s total brokerage accounts included 30,747 gross new brokerage accounts. Total brokerage accounts reflect the company’s ability to gain and retain customers who trade and invest.

Moreover, E*TRADE’s net new brokerage assets were $0.2 billion compared with $4.2 billion in the prior month.

As of the end of Oct 2016, E*TRADE’s customer security holdings were $218.1 billion, down from $222.1 billion in the prior month. The company’s brokerage-related cash declined slightly to $48.1 billion from $48.3 billion in the prior month, with customers being the net buyers of about $0.7 billion in securities. Moreover, bank-related cash and deposits for the company were $5.2 billion, in line with the prior-month figure.

Peer Performance

Among other investment brokers, Interactive Brokers Group, Inc.’s (IBKR - Free Report) Electronic Brokerage segment reported a year-over-year decline in DARTs for Oct 2016. The segment deals with the clearance and settling of trades for both individual and institutional clients globally. Total client DARTs were 603,000, down 8% from Oct 2015 and 7% from Sep 2016. However, total customer accounts were 375,000, up 15% year over year and 1% from the prior month.

TD Ameritrade Holding Corporation (AMTD - Free Report) came up with average client trades per day of 438,000 in its activity report for Oct 2016. While the reported figure declined 4% from the prior month, it remained stable compared with the prior-year period.

The Charles Schwab Corporation (SCHW - Free Report) released its monthly activity report for Oct 2016. The monthly metrics reflected an overall improvement. The total client assets were $2.7 trillion at October end, increasing 6% year over year. Further, client assets receiving ongoing advisory services were $1.35 trillion as of Oct 31, 2016, up 7% year over year.

Our Viewpoint

Amid the challenging economic scenario, growth in DARTs and new brokerage accounts will prove to be beneficial for the company. We, however, are 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.

Nevertheless, E*TRADE’s initiatives to reduce balance-sheet risk appear to be promising. We are also encouraged by the brokerage firm’s restructuring moves and efforts to revamp its brand, launch new products and services, and improve its technology base to offer a better digital experience to customers.

E*TRADE currently carries a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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