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What Could Boost E*TRADE Financial in 2018?

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May. 18 2018, Updated 7:31 a.m. ET

Federal Reserve’s decision

Global economic factors impact the performance metrics of E*TRADE Financial (ETFC), as well as its competitors (XLF) TD Ameritrade Holding (AMTD), Interactive Brokers Group (IBKR), and Charles Schwab (SCHW).

During times of higher volatility, the boost in trading volumes by market participants help these companies garner trading revenues and improve their financial results. In the first quarter, E*TRADE’s average commission per trade stood at $7.27.

The net revenues of E*TRADE Financial rose $71.0 million to $708.0 million in the first quarter. This increase was due to average interest-earning assets, a boost in trading activities, and expansion in its net interest margin.

In 2018, the Federal Reserve’s decision to implement several more interest rates hikes could benefit the company in terms of increased interest income and net revenues.

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Net interest margin

E*TRADE Financial’s net interest income rose by $26.0 million in the first quarter, reaching $445.0 million. This rise was supported by the expansion of the net interest margin of 5 basis points and a boost in its average interest-earning assets. The company’s net interest margin witnessed a positive impact due to investment yields, interest rates, and average margin balances.

Sequentially, E*TRADE’s commission revenues witnessed a substantial rise in the first quarter due to the boost in the Daily Average Revenue Trades (or DARTs). The company’s DARTs are expected to depend on volatility in the equity markets.

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