eTrade 2006 Annual Report Download - page 22
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements and the
related notes that appear elsewhere in this document.
GLOSSARY OF TERMS
In analyzing and discussing our business, we utilize certain metrics, ratios and other terms that are defined
in the Glossary of Terms, which is located at the end of Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations.
OVERVIEW
Strategy
Our strategy centers on strengthening and growing our retail business and leveraging that growth in our
institutional business. We strive to further develop our retail business by acquiring, expanding and retaining our
relationships with global retail customers. We offer our retail and institutional customers a suite of investing,
trading, banking and lending products. We plan to grow those relationships organically by using technology to
deliver an attractive combination of product, service and price to the value-driven mass affluent customer. We
also intend to grow, where appropriate, through targeted acquisitions which leverage our existing business
platform and through further expansion into certain international markets.
As we expand our global customer base, and increase the retail customer cash and credit products we hold
on our balance sheet, we believe that our business will benefit. As our institutional business manages our balance
sheet on an enterprise-wide basis, we become less dependent on revenue from market-driven customer trading
activity, and our income, while still positioned to benefit from a strong equity market, becomes more recurring in
nature. As a result, net operating interest income has become our leading category of revenue, and we anticipate
this trend will continue.
Key Factors Affecting Financial Performance
Our financial performance is affected by a number of factors outside of our control, including:
• customer demand for financial products and services;
• competitors’ pricing on financial products and services;
• interest rates and the shape of the interest rate yield curve; and
• the performance, volume and volatility of the equity and capital markets.
In addition to the items noted above, our success in the future will depend upon, among other things:
• continuing our success in the acquisition, growth and retention of customers;
• deepening customer acceptance of our investing, trading, banking and lending products, including
E*TRADE Complete;
• disciplined expense control and improved operational efficiency;
• maintaining strong overall asset quality; and
• prudent risk and capital management.
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