eTrade 2008 Annual Report Download - page 44

margin debt and retail customer assets. We believe this disruption was due to the uncertainty surrounding the
Company in connection with the credit related losses in our institutional segment. While we anticipate credit
related losses will be at historically high levels in future periods, primarily in our home equity loan portfolio, we
believe our retail customer base has stabilized. During the year ended December 31, 2008, our retail customer
base showed positive growth trends, including adding almost 246,000 net new accounts and growth in net new
customer assets of approximately $5.4 billion ($6.4 billion excluding the sale of RAA). We believe these are
indications that our retail segment has not only stabilized but has returned to modest growth.
Retail segment income decreased 23% to $608.1 million for the year ended December 31, 2008 compared to
2007. This was due primarily to a decrease in net operating interest income and an increase in total segment expense.
Retail net operating interest income decreased 14% to $829.7 million for the year ended December 31, 2008
compared to 2007. This decrease was driven primarily by a decrease in margin debt as well as the above market
rate on our Complete Savings Account. We plan to reduce the rate on this product in future periods which we
believe will result in an improvement to retail net operating interest income.
Retail commission revenue decreased 1% to $514.7 million for the year ended December 31, 2008
compared to 2007. The slight decrease in commission revenue was primarily the result of a decrease in average
commission per trade of 7%, offset by an increase in DARTs of 6%.
Retail segment expense increased 3% to $975.5 billion for the year ended December 31, 2008 compared to
2007. This increase related primarily to our planned growth in marketing spend as we expanded efforts to
promote our products and services to retail investors.
As of December 31, 2008, we had approximately 2.6 million active brokerage accounts, 1.0 million active
stock plan accounts and 0.9 million active banking accounts. For the years ended December 31, 2008 and 2007,
our retail brokerage products contributed 67% for both years, and our banking products contributed 28% and
27%, respectively, of total retail net revenue. All other products contributed less than 10% of total retail net
revenue for the years ended December 31, 2008 and 2007.
2007 Compared to 2006
Retail segment income increased 13% to $794.4 million for the year ended December 31, 2007 compared to
2006. The increase in retail segment income during the year ended December 31, 2007 compared to 2006 was
due to an increase in net operating interest income and commission revenue, offset by lower gain on sales of
loans and securities, net.
Retail net operating interest income increased 11% to $962.6 million for the year ended December 31, 2007
compared to 2006. This increase was driven by customer cash and deposits, which generally translate into a
lower cost of funds. The growth in customer cash and deposits during the first three quarters of 2007 was largely
offset by the decline in customer cash during the fourth quarter of 2007.
Retail commission revenue increased 13% to $520.2 million for the year ended December 31, 2007
compared to 2006. The increase in commission revenue was primarily the result of increased trading volumes in
the overall domestic equity market and in our international commissions.
Retail segment expense increased 9% to $947.9 million for the year ended December 31, 2007 compared to
2006. This increase related to our targeted growth in marketing spend as we expanded efforts to promote our
products and services to retail investors.
As of December 31, 2007, we had approximately 2.5 million active brokerage accounts, 1.1 million active
stock plan accounts and 0.8 million active banking accounts. For the years ended December 31, 2007 and 2006,
our retail brokerage products contributed 67% and 69%, respectively, and our banking products contributed 27%
and 25%, respectively, of total retail net revenue. All other products contributed less than 10% of total retail net
revenue for the years ended December 31, 2007 and 2006.
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