eTrade 2007 Annual Report Download - page 31
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The following sections describe in detail the changes in key operating factors and other changes and events
that have affected our consolidated net revenue, expense excluding interest, other income (expense) and income
tax expense (benefit).
Revenue
The components of net revenue and the resulting variances are as follows (dollars in thousands):
Year Ended December 31,
Variance
2007 vs. 2006
2007 2006 Amount %
Revenue:
Operating interest income $ 3,569,711 $ 2,774,679 $ 795,032 29 %
Operating interest expense (1,960,656) (1,374,647) (586,009) 43 %
Net operating interest income 1,609,055 1,400,032 209,023 15 %
Provision for loan losses (640,078) (44,970) (595,108) 1323 %
Net operating interest income after provision for
loan losses 968,977 1,355,062 (386,085) (28)%
Commission 694,110 625,265 68,845 11 %
Fees and service charges 258,075 238,760 19,315 8 %
Principal transactions 103,229 110,235 (7,006) (6)%
Gain (loss) on loans and securities, net (2,450,036) 55,986 (2,506,022) (4476)%
Other revenue 47,478 35,013 12,465 36 %
Total non-interest income (expense) (1,347,144) 1,065,259 (2,412,403) (226)%
Total net revenue $ (378,167) $ 2,420,321 $(2,798,488) (116)%
Total net revenue declined by 116% to negative revenue of $378.2 million for the year ended
December 31, 2007 compared to 2006. This decline was driven by the $2.2 billion loss on the sale of our asset-
backed securities portfolio and an increase in the provision for loan losses of $595.1 million to $640.1 million for
the year ended December 31, 2007 compared to 2006.
Net Operating Interest Income
Net operating interest income increased 15% to $1.6 billion for the year ended December 31, 2007
compared to 2006. 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 increase in net operating interest income was due primarily to the increase in enterprise
interest-earning assets. Average loans, net as a percentage of average enterprise interest-earning assets increased
5% to 54% for the year ended December 31, 2007 compared to 2006.
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