E-Trade (NASDAQ: ETFC) is a financial services company that provides online brokerage, and related products and services, primarily to individual retail investors. In 2018, the company handled 5.2 million brokerage accounts and held $20 billion in custodial assets. Trefis highlights trends in E-Trade’s Revenues over the years along with our forecast for the next 2 years in an interactive dashboard. After slashing trading commissions to zero in October, we believe that E-Trade’s Net Interest Revenue is likely to contribute almost 80% of the company’s top-line in 2020 – up from 64% of revenues in 2018.
A Quick Look at E-Trade’s Revenues
- Coronavirus Recovery Watch: Capital Market Portfolio: 15% 5D Return vs. (-25%) YTD Return – [BlackRock, E*TRADE, Schwab & TD Ameritrade]
- Why Isn’t Charles Schwab’s Stock Benefiting From The Spike In Trading Volumes?
- E*TRADE: Will Lower Trading Commissions Cause Revenues To Be Short Of Consensus Estimates For FY 2019
- Is E*TRADE Stock Fairly Priced?
- Changing Business Environment Likely To Be A Boon For Schwab and Ameritrade Despite Zero Commissions
- Interest Income Gains To Drive E-Trade’s Q2 Results
E-Trade reported $2.8 billion in Net Revenues for full-year 2018. This included four revenue streams:
- Net Interest Revenue: $1.8 billion in FY2018 (64% of Net Revenues). It is largely earned on investment securities and margin receivables
- Fees and Service Charges: $431 billion in FY2018 (15% of Net Revenues). The company charges for order flow, sweep deposits in money market accounts, advisor management, mutual funds, and foreign exchange services.
- Trading Commissions: $498 million in FY2018 (17% of Net Revenues). A trading commission is charged for executing trades in stocks, bonds, options, futures, etc. This
- Other Revenues: $98 million in FY2018 (3% of Net Revenues). It includes income from stock plan administration software and services to corporate clients.
E-Trade’s Revenues have grown at a CAGR of 22% from $1.9 billion in 2016 to $2.8 billion in 2018, but are expected to shrink to $2.4 billion in 2020
- E-Trade has added $932 million to its Revenues over the last two years.
- Revenue growth was primarily driven by the Net Interest Revenue, supported by increasing short-term interest rates.
- In 2020, Net Interest Revenue is likely to decline due to the low short-term interest rate environment, even though we expect the company’s interest-earning assets continue to grow.
- Though Fee and Service Charges are expected to follow the growth trajectory, the contribution of asset management fees is expected to be low due to E-Trade’s small custodial asset base of $20 billion (in comparison, Schwab’s has roughly $900 billion in custody assets).
- Moreover, we expect E-Trade to face additional top-line pressure from the recently announced Schwab-Ameritrade merger.
Additional details about how revenues for each of E-Trade’s segments has trended over the years is available in our interactive dashboard.
What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs
For CFOs and Finance Teams | Product, R&D, and Marketing Teams
More Trefis Data
Like our charts? Explore example interactive dashboards and create your own