| 19 May 2010

To say we were shocked at E*TRADE Corporation's (ETFC) new account numbers would be an understatement. If you've been following our recent posts you know that we haven't been shy about commenting on E*TRADE's sluggish account growth. Okay, not even sluggish because it wasn't growing but in fact they were losing accounts despite a huge marketing push.

We assumed the problems to be systemic and far reaching, so we expected the pale growth numbers to continue. Today, however, the firm reported that they actually added 17,627 net new brokerage accounts in April. While not as high as the 31,000 and change they added a year ago, it's world's higher than the recent losses, and the highest monthly gain since May of 2009.

What's behind the sudden surge in new account growth? E*TRADE representative have yet to respond to our emails.

But we do know that they spent $38 million in Q1, a 46% surge in ad spending versus Q4. This would, at least in part, explain the surge. New accounts typically lag marketing spend by about a quarter (takes time to apply and fund). But a 46% surge in ad spending doesn't explain an 828% leap in net new accounts versus the entire first quarter. (17,627 new accounts in April verus 1,898 new accounts in all of Q1.)

Trading volume was up month-over-month for the firm. Not much a surprise given the jumpy markets and the surge in new accounts. Though we are still way down versus year-ago figures. 




Now the question is whether this increased spend is worth the cost. If we assume a lag in new accounts (spend in the first quarter, show funded accounts in the second quarter) and continued net additions in the 17,000 range each month, that would yield 52,000 net new accounts in the quarter against $38 million in advertising, or $718 per net new account. Not great, but not bad either. It's also a very big "if" at this point.



Total assets for the firm rose just slightly from $159 billion in March to $162 billion in April. This is also a surprise. You would expect this surge in new accounts to also bring with it a surge in assets, but it did not. (The S&P 500 gained only 0.5% during the same timeframe.)




OptiosnXpress also reported monthly metrics today, we'll work on those next.