E TRADE Financial Corp (ETFC)

[eastunder]

E*Trade's Strong April Draws Yawn
Michael Baron
05/19/10 - 10:36 AM EDT

NEW YORK (TheStreet) -- E*Trade Financial(ETFC) reported a healthy sequential increase in trading volumes for April on Wednesday, although the year-over-year comparison was less favorable.

Daily average revenue trades, or DARTs, totaled 181,556 for the 21 trading days last month, up 17.2% from March levels, but down 14% from the same period a year earlier.

The online broker, which has seen a marked decline in its stock since late April when hedge fund Citadel Investment Group announced plans to lighten its substantial stake in the company, said it ended April with 4.27 million total accounts, a decline of 3.8% from last year. Total customer assets, however, stood at $162.4 billion at month's end, a rise of 2.3% on a sequential basis and 36% year-over-year.

Shares were tacking on a penny to $1.50 in morning trades on comparatively light volume of 4.8 million.

E*Trade customers added to their equity positions in April, increasing their security holdings by 4%, or roughly $4 billion, between new assets and purchase. On a net basis, customers bought $1.3 billion worth of securities during the month.

BMO Capital analyst Michael Vinciquerra was cautiously optimistic about second-quarter trading volumes for E*Trade based on these numbers, noting that, while the performance puts the company ahead of the firm's estimate of 156,300, it's still early.

"[W]e are leaving estimates unchanged at this time as we are only one month into the quarter and retail activity has been softening a bit the last few days," he told clients in a research note. BMO Capital has a market perform rating on E*Trade with a $2 target price. The firm doesn't expect the company to be profitable again until the fourth quarter of this year.

From an E*Trade shareholder standpoint, May has proven a much crueler month than April. The stock closed at $1.84 on April 28 before the announcement of Citadel's plans to shed 170 million common shares. The offering, boosted to 172 million shares, priced the next day at $1.75 each, and the stock has been in steady decline since. It finished Tuesday's session at $1.49, off 19% since Citadel's announcement. The move wiped out the stock's slight gain in 2010, and put it down 15% year-to-date.

And while it's purely a cosmetic move, shareholders are about to see the amount of stock they hold come down. The company held its annual meeting on May 13 and shareholders approved a 1-for-10 reverse stock split that the board anticipates will become effective in early June. According to an investor presentation on April 30, the company has about 1.96 billion common shares, along with outstanding debt convertible into another 930 million shares, so the reverse split will bring potential common share count down to around 290 million.

According to data from Thomson Reuters, other big institutional investors in E*Trade include TIAA-CREF with 113.4 million shares, or a 5.2% stake; Vanguard Group with 94 million shares, or a 4.3% stake; BlackRock Institutional Investors with 90.5 million shares, or a 4.1% stake; and State Street Global Advisors with 66.4 million shares, or a 3% stake.

Both TIAA-CREF and Vanguard had added to their positions as of their latest quarterly filings dated March 31, with Vanguard boosting it by nearly 40%. BlackRock and State Street both lessened their holdings.

--Written by Michael Baron in New York.