Growth In Interest Earning Assets, Trading Volumes Should Boost E-Trade’s Q3

by Trefis Team
-4.90%
Downside
44.74
Market
42.55
Trefis
ETFC
E-Trade
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E*Trade Financial (NASDAQ:ETFC) fared well in the first half of the year, and we expect this trend to continue when the company reports its third quarter earnings on October 19th. We believe that interest-earning assets will be the key driver of growth. The rate hikes in March and June 2017, driven by improvements in U.S. GDP and employment rates, led to over 10% year-to-date growth in E-Trade’s customer cash and deposits through August. We believe the growth momentum continued into September as well. Consequently, revenues from this stream, which contribute around 56% of the company’s overall revenues, are likely to increase significantly.

Trading commissions account for nearly a quarter of the company’s overall revenues. Although the trading volumes saw around 43% year-over-year growth, most of it was attributed to the acquisition of OptionsHouse. Our primary concern is that the company’s decision to slash its commission per trade from $9.99 to $6.95, following price cuts by rivals such as Ameritrade, Charles Schwab and Fidelity, will weigh on its results. Since trading commissions generate only a small percentage of the company’s overall revenue, we do not expect the price cut to have a major impact on revenue and EPS growth in the near term.

See Our Complete Analysis For E-Trade Here

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