eTrade 2004 Annual Report Download - page 37

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Table of Contents
Index to Financial Statements
Analysis of Brokerage and Banking Revenues
Brokerage Revenues
Brokerage revenues contributed approximately 60% of our net revenues in 2004. Brokerage revenues increased 5% to $924.2 million in
2004 and 2% to $879.1 million in 2003 from the comparable prior year periods. The increases in 2004 and 2003 were largely due to increased
commissions and principal transactions and increased brokerage interest income in 2004.
The following table sets forth the components of net brokerage revenues and dollar and percentage change information for the periods
indicated (dollars in thousands):
The following table presents key drivers and additional indicators that we consider important in measuring performance and explaining
brokerage revenues:
Commissions are earned when customers execute trades. The primary factors that affect our commissions are DARTs and average
commission per revenue trade. The average commission per revenue trade is impacted by the mix between and within our domestic,
international and professional businesses. Each business has a different pricing structure, unique to its customer base, and as a result, a change
in the executed trades between these businesses impacts average commission per revenue trade. Each business has different trade types (e.g.
equities, options, fixed income and mutual funds) that can have different commission rates and as a result, changes in the mix of trade types
within these businesses impact average commission per revenue trade. Our commission revenue does not include revenues from our brokerage
institutional customers, which are included in
31
Year Ended December 31,
Variance
2004 vs. 2003
2003 vs. 2002
2004
2003
2002
$ Amount
%
$ Amount
%
Brokerage revenues:
Commissions
$
349,539
$
337,468
$
294,791
$
12,071
4
%
$
42,677
14
%
Principal transactions
252,162
229,846
223,531
22,316
10
%
6,315
3
%
Other brokerage
-
related
163,686
177,682
174,263
(13,996
)
(8
)%
3,419
2
%
Brokerage interest income
177,362
144,379
182,103
32,983
23
%
(37,724
)
(21
)%
Brokerage interest expense
(18,524
)
(10,305
)
(12,515
)
(8,219
)
(80
)%
2,210
18
%
Net brokerage revenues
$
924,225
$
879,070
$
862,173
$
45,155
5
%
$
16,897
2
%
Percentage Change
Year Ended December 31,
2004
versus
2003
2003
versus
2002
2004
2003
2002
Daily average revenue trades (
“
DART
”
s)
129,285
87,464
8
%
36
%
Average commission per revenue trade
$
10.75
$
11.32
$
13.48
(5
)%
(16
)%
Total brokerage revenue trades
(1)
32,515,292
29,814,930
21,866,047
9
%
36
%
Active brokerage accounts, end of period
(2)
2,956,090
2,848,625
3,690,916
4
%
(23
)%
Average (dollars in millions):
Customer margin balances
$
2,060
$
1,225
$
1,250
68
%
(2
)%
Customer money market fund balances
$
3,286
$
6,659
$
7,743
(51
)%
(14
)%
SDA balances
$
5,009
$
877
$
—
471
%
*
Stock borrow balances
$
1,088
$
366
$
317
197
%
15
%
Stock loan balances
$
1,318
$
675
$
441
95
%
53
%
Customer credit balances
$
2,385
$
2,134
$
1,471
12
%
45
%
(1)
Total brokerage revenue trades include domestic, international and professional revenue trades.
(2)
We consider a brokerage account “active” if the account has an asset balance of at least $25 at the end of the quarter, if a trade has been made in the account in the past six months or if
the account was opened in connection with a corporate employee stock benefit program.