eTrade 2007 Annual Report Download - page 43

Retail net operating interest income increased 12% to $986.7 million for the year ended December 31, 2007
compared to the same period in 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 14% to $546.2 million for the year ended December 31, 2007
compared to the same period in 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 where DARTs
increased 43% from 21,633 to 31,016 for the year ended December 31, 2007 compared to the same period in
2006. Retail commission revenue represented 79% and 77% of total commission revenue for the years ended
December 31, 2007 and 2006, respectively.
Retail segment expense increased 8% to $1.0 billion for the year ended December 31, 2007 compared to the
same period in 2006. This slight 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 3.6 million active trading and investing accounts and
1.1 million active deposit and lending accounts. For the years ended December 31, 2007 and 2006, our retail
trading and investing products contributed 70% for both years, and our deposit products contributed 24% and
22%, 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.
2006 Compared to 2005
Our geographically dispersed retail accounts grew 3% from 2005 to 2006. As of December 31, 2006, we had
approximately 3.6 million active trading and investing accounts and 0.8 million active lending and deposit
accounts. For the years ended December 31, 2006 and 2005, our retail trading and investing products contributed
70% and 66%, respectively, and our deposit products contributed 22% and 19%, respectively, of total retail net
revenue. All other products contributed less than 10% of total retail net revenue for the years ended
December 31, 2006 and 2005.
The increase in retail segment income during the year ended December 31, 2006 compared to 2005 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 after provision for loan losses increased 98% to
$883.6 million for the year ended December 31, 2006 compared to 2005. Average margin receivables increased
143% to $6.8 billion for 2006 compared to 2005. Higher margin balances generally translate into a higher
interest rate earned on interest-earning assets. Customer cash and deposits increased 19% at December 31, 2006
compared to December 31, 2005. Higher customer cash and deposit balances generally translate into a lower cost
of funds as deposits increased in comparison to other borrowings. Net operating interest income growth included
the impact of the Harrisdirect and BrownCo acquisitions which occurred in the fourth quarter of 2005.
Retail commission revenue increased $140.2 million for 2006 compared to 2005 due to higher volumes
(DARTs), offset by lower average commission per trade. The increase in DART volumes was the result of the
Harrisdirect and BrownCo acquisitions as well as strong organic growth in domestic equity, international equity
and option trades. Offsetting these increases were lower gains on loans and securities, net of $36.7 million for
2006.
Retail segment expense increased $340.2 million for 2006 compared to 2005. The increase for 2006 was
related primarily to the $29.6 million restructuring charge, an increase in the compensation expense due to an
increased number of employees in our service organization and increased fraud-related losses.
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