E*TRADE Financial (ETFC) April DARTs Increase 1% Y/Y

E*TRADE Financial Corporation (NASDAQ:ETFC) reported a rise in its Daily Average Revenue Trades (DARTs) in the monthly market activity report for Apr 2016. According to the report, E*TRADE’s DARTs were 159,215, up 1% from both sequentially and 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 5.04 million, which comprised about 3.27 million brokerage accounts, 1.44 million stock plan accounts and 0.33 million banking accounts.

For the reported month, E*TRADE’s total brokerage accounts included 34,724 gross new brokerage accounts. Notably, net new brokerage accounts were 10,866. 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 a negative $0.4 billion compared with $1.0 billion in the prior month.

As of the end of Apr 2016, E*TRADE’s customer security holdings were $205.6 billion, in line with the prior month figure. The company’s brokerage-related cash almost remained stable at $42.6 billion, with customers being the net sellers of about $0.2 billion in securities. Moreover, bank-related cash and deposits for the company stood at $5.3 billion, down $0.1 billion from the prior month figure.

Peer Performance

Among other investment brokers, Interactive Brokers Group, Inc.’s (NASDAQ:IBKR) Electronic Brokerage segment reported total client DARTs of 662,000 for Apr 2016, up 5% from Apr 2015 and 1% from the previous month. Further, total customer accounts were 349,000, up 15% from Apr 2015 and 1% from last month.

TD Ameritrade Holding Corporation (NASDAQ:AMTD) reported average client trades of 470,000 per day in its activity report for Apr 2016. This marks a 3% rise from the prior-year period and 2% from the previous month.

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 #3 (Hold). A better-ranked investment broker is Raymond James Financial, Inc. (NYSE:RJF) with a Zacks Rank #1 (Strong Buy).

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