E*TRADE's April DARTs Down 13.2% - Analyst Blog

Online brokerage firm E*TRADE Financial Corporation ETFC reported Daily Average Revenue Trades (DARTs) of 171,271 for Apr 2014, down 13.2% from Mar 2014. However, it increased 21.2% 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.

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 40,263 gross new brokerage accounts. Notably, gross new brokerage accounts fell 6.5% month over month. Moreover, E*TRADE's net new brokerage assets were negative $0.7 billion, compared with $1.5 billion in the prior month. Total brokerage accounts reflect the company's ability to attract and retain traders and investors.

As of April end, E*TRADE's customer security holdings were $187.9 billion, up 0.4% from the prior month. However, the company's brokerage-related cash fell 3.2% from the prior month to $38.8 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 $6.1 billion, down from $6.3 billion in the prior month.

Our Viewpoint

Although E*TRADE opened the second quarter with lower trading activities, nothing conclusive can be arrived at and we look forward to the performance of the remaining 2 months. We remain cautious owing to a challenging economy, market volatility and new regulations that might further lower trading activities.

However, we remain encouraged owing to the company's initiatives to reduce balance sheet risk. While this will benefit the company in the long run, there will be pressure on the net interest margin in the near term.

E*TRADE currently carries a Zacks Rank #1 (Strong Buy). In this space, Investment Technology Group Inc. ITG is another company worth considering with the same Zacks Rank.

Performance of Other Brokerage Firms

TD Ameritrade Holding Corp.'s AMTD reported an uptick in its average client trades per day of 448,000 in its Activity Report for Apr 2014. This figure was up 7% from the prior month while it increased 17% year over year.

Another sector participant The Charles Schwab Corp. SCHW also recorded a rise in Daily Average Trades (DATs) for Apr 2014. In its monthly market activity report, the company reported DATs of 534,900, marking an increase of 14% from the prior-year month and 4% from the previous month.