eTrade 2005 Annual Report Download - page 57

Table of Contents
SEGMENT RESULTS REVIEW
Retail
As shown in the following table, retail segment income increased 49% to $458.8 million in 2005 compared to 2004 (dollars in thousands,
except for key metrics):
Year Ended December31,
Variance
2005 vs. 2004
2005
2004
2003
$Amount
%
Retail segment income:
Commissions
$
339,654
$
328,889
$
316,092
$
10,765
3
%
Gain on sales of loans and
securities, net
63,705
93,694
235,064
(29,989
)
(32
)
%
Service charges and fees
116,102
84,445
104,531
31,657
37
%
Other revenues
112,836
106,457
104,157
6,379
6
%
Net interest income
445,124
322,278
133,970
122,846
38
%
Net segment revenues
1,077,421
935,763
893,814
141,658
15
%
Total segment expenses
618,664
628,146
769,318
(9,482
)
(2
)
%
Total retail segment income
$
458,757
$
307,617
$
124,496
$
151,140
49
%
Key Metrics:
DARTs
97,740
83,643
77,052
14,097
17
%
Average commission per trade
$
13.82
$
15.63
$
16.41
$
(1.81
)
(12
)
%
Average margin balance (in millions)
$
2,767
$
2,048
$
1,219
$
719
35
%
Retail client assets (in billions)
$
178.5
$
100.0
$
82.9
$
78.5
79
%
Products per customer
2.1
1.9
1.7
0.2
11
%
Our retail segment generates revenues and earnings through investing, trading, cash management and lending relationships with retail
customers. These relationships drive essentially five sources of revenues including commissions, gain on sales of loans and securities,
net, service charges and fees, other revenues and net interest income. This segment also includes results from our stock plan
administration products and services, as we are ultimately servicing a retail customer through these corporate relationships. Our
geographically dispersed retail accounts grew by 20% in 2005. A portion of this growth is attributable to our acquisitions of BrownCo
and Harris
direct
during the fourth quarter of 2005. As of December31, 2005, we had approximately 3.6million active brokerage accounts
and 0.7million active banking accounts.
The increase in retail segment income in 2005 from 2004 was due to an increase in net revenue primarily driven by an increase in net
interest income, offset by lower gains on sales of loans and securities, net. DARTs increased 17% in 2005 compared to 2004. While the
increase in DARTs did not produce a corresponding increase in commission revenues, these customers did help drive the increase in
cash deposits held in SDA accounts. Higher SDA and deposit balances translate into a lower cost of funds as deposits increase in
comparison to other borrowings. Retail net interest income in 2005 increased $122.8 million compared to 2004. The increase was driven
by an increase in both average interest-earning assets and the net interest spread earned. Growth in average margin balances
continues to be strong for the retail segment, with average balances increasing 35%, to $2.8 billion in 2005 compared to $2.0 billion in
2004 including the impact of our acquisitions. Other key drivers of the increase in retail segment income were growth in the average
balance of loans and deposits which increased 54% and 11%, respectively over last year. Service charges and fees increased by 37% in
2005 compared to 2004, primarily due to an increase in account service fees. Offsetting these positive variances were lower gains on
the sale of loans and securities, net of $30.0 million due to the lower gains on the sale of mortgage loans and securities impairment.
The increase in retail segment income in 2004 from 2003 was due to an increase in net revenues and reduced expenses. Net revenue
growth was largely driven by an increase in net interest income and, to a lesser
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2006. EDGAR Online, Inc.