eTrade 2006 Annual Report Download - page 30
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Net operating interest income after provision for loan losses continues to be our largest source of revenue
and now represents 56% of total net revenue for 2006. This reflects our focus on retaining retail customer cash
and deposits and retail credit balances. Net operating interest income is earned primarily through holding credit
balances, which includes margin, real estate and consumer loans, and by holding customer cash and deposits,
which are a low cost source of funding. The table below presents each revenue component as a percentage of
total net revenue.
Year Ended December 31, Variance
2006 2005 2006 vs. 2005
Revenue:
Net operating interest income after provision for loan
losses 56% 48% 8 %
Commission(1) 26 27 (1)%
Service charges and fees 6 8 (2)%
Principal transactions 4 6 (2)%
Gain on sales of loans and securities, net 2 6 (4)%
Other revenue 6 5 1 %
Total net revenue 100% 100% — %
(1) Retail commission revenue represented 20% of total net revenue for both the years ended December 31, 2006 and 2005. Institutional
commission revenue represented 6% and 7% of total net revenue for the years ended December 31, 2006 and 2005, respectively.
Net Operating Interest Income After Provision for Loan Losses
Net operating interest income after provision for loan losses increased 66% to $1,355.1 million for 2006
compared to 2005. The increase in net operating interest income was due primarily to growth in enterprise
interest-earning assets coupled with an increase in enterprise net interest spread. The growth in enterprise
interest-earning assets was driven by increases in both loans, net and margin receivables. The increase in
enterprise net interest spread was driven by changes in our mix of lending and funding sources. Average loans,
net and margin receivables as a percentage of average enterprise interest-earning assets increased 8% to 64% for
2006 compared to 2005. Average retail deposits and free credits as a percentage of average enterprise interest-
bearing liabilities increased 9% to 62% in 2006 compared to 2005.
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