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E*TRADE’s Net Revenues Rose in 1H17—Here’s Why

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Oct. 16 2017, Updated 7:43 a.m. ET

E*TRADE’s net revenues

E*TRADE Financial (ETFC) generates the majority of its net revenues through commissions, net interest income, and fees and service charges. The company generates commission revenues through customer trades. The company also incurs non-interest expenses, primarily expenses related to advertising and compensation.

E*TRADE Financial reported total net revenues of ~$1.1 billion in 1H17 compared to $946.0 million in 1H16, reflecting a 19% increase. This substantial rise resulted from growth in the company’s net interest income as well as fees and service charges.

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Net interest income is calculated by deducting interest expenses from interest income. E*TRADE Financial garners a majority of its interest income from margin receivables and investment securities. The company pays interest primarily on customer payables, deposits, and corporate debt. The company’s legacy loan portfolio also contributes to its net interest income.

In 1H17, E*TRADE Financial reported net interest income of $675.0 million compared to $573.0 million in 1H16, which implies an increase of 18%. The company’s other revenues rose from $20.0 million in 1H16 to $22.0 million in 1H17, reflecting a 10% rise.

Net income margin

On a last-12-month (or LTM) basis, E*TRADE Financial Corporation (ETFC) has generated a net income margin of ~27.7%. On the other hand, its peers (XLF) have generated the following net income margins on an LTM basis:

  • LPL Financial Holdings (LPLA): ~5.1%
  • Lazard Limited (LAZ): 17.4%
  • Goldman Sachs Group (GS): ~19.7%
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