E-Trade Continues Sustained Growth In February; Price Cut In Commissions To Affect Revenues

E*Trade Financial (NASDAQ:ETFC) continued its strong performance in February, with impressive growth across its key metrics. Despite a fairly volatile trading period in February last year, due to an economic slowdown and oil price rally, the daily trading volumes grew by over 33% from the prior year and 9% sequentially. The company decided to slash its  commission per trade from $9.99 to $6.95 following the price cuts by rivals such as Charles Schwab, Fidelity and Ameritrade. The price cut is likely to affect the brokerage’s top line slightly, as trading commissions generate around 25% of the company’s revenue.

Interest earning assets, which contribute around 57% of the company’s revenue, continued their strong growth. This was primarily due to the expectation of further interest rate hikes this year. As E-Trade has a higher yield on its interest earning assets (2.7%) relative to many competitors, rate hikes should offset the decline in trading commissions from the recent price cut. With the likelihood of a series of hikes in 2017, we expect the growth in assets to continue.

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