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E*TRADE's (ETFC) May 2015 DARTs Fall 4% Sequentially - Analyst Blog

Online brokerage firm E*TRADE Financial Corporation ETFC reported a fall in its Daily Average Revenue Trades (DARTs) for May 2015. According to the monthly market activity report for May, E*TRADE’s DARTs totaled 151,444, down 4% from the prior month and up 3% 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 fall in DARTs largely reflects investors’ unwillingness to invest in equity markets.

At the end of the month under review, E*TRADE had approximately 4.8 million accounts – 3.2 million brokerage accounts, 1.3 million stock plan accounts and 0.3 million banking accounts.

For the reported month, E*TRADE’s total brokerage accounts included 27,865 gross new brokerage accounts. Moreover, the company’s net new brokerage assets totaled $1.0 billion compared with negative $0.4 billion recorded in the prior month. Total brokerage accounts reflect the company’s ability to attract and retain customers who trade and invest.

As of May-end, E*TRADE’s customer security holdings were $220.6 billion, up 1.7% from the preceding month. The company’s brokerage-related cash increased $0.7 billion to $42.0 billion, with customers being the net buyers of about $0.2 billion in securities. Moreover, the company’s bank-related cash and deposits stood at $5.6 billion, up $0.1 billion compared with the prior month.

Peer Performance

Earlier in June, Interactive Brokers Group, Inc.’s IBKR Electronic Brokerage segment reported a sequential fall in its brokerage metrics for May 2015. Total DARTs were 617,000, down 2% from Apr 2015.

Last week, another brokerage firm, TD Ameritrade Holding Corp. AMTD came out with average client trades per day of 427,000 in its activity report for May 2015. The figure was down 7% from the prior month, but up 11% from the year-ago period.

Our Viewpoint

We believe E*TRADE is well positioned to improve its trading volumes going forward, backed by a rebound in equity markets. Moreover, the firm’s initiatives to reduce balance-sheet risk appear promising, although they will exert near-term pressure on the net interest margin.

At the same time, the company’s strong capital position is impressive and will likely help it navigate through the current cycle.

E*TRADE currently carries a Zacks Rank #3 (Hold). The Goldman Sachs Group, Inc. GS is a better-ranked stock in the same industry, carrying a Zacks Rank #1 (Strong Buy).

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