March 14, 2012 / 5:17 PM / 5 years ago

Trading volumes jump in Feb at US discount brokers

* Schwab client trades up 7 pct m/o/m; assets up 4 pct

* E*Trade DARTs up 16.2 pct m/o/m; brokerage assets up $1.9 bln

* Analysts say metrics above expectations

By John McCrank

March 14 (Reuters) - The brokerage units of Charles Schwab Corp and E*Trade Financial reported increased levels of both trading volumes and asset levels in February as retail investors reacted to rising equity markets.

Trading volumes fell sharply from mid-December and into January because of ongoing concerns over the debt crisis in Europe and the effect it might have on the fragile U.S. economy. Since then, trading volume has slowly improved.

Howard Chen, an analyst at Credit Suisse, said February's figures do not represent an "all-clear," but pointed to more engagement from retail investors.

"We definitely saw measured signs of improvement with trading activity, account growth and new asset generation all picking up steam - this was the strongest month for net new assets for E*Trade in quite some time," he said.

San Francisco-based Schwab said on Wednesday that its client trades in February were up 5 percent from a year earlier, and up 7 percent from January. The financial services company had an average of 500,100 trades per day in February.

Schwab, one of the largest U.S. brokerages, said total client assets rose 11 percent from a year earlier and were up 4 percent from January, to a record $1.81 trillion. The percentage increase was in line with the rise in the S&P 500 Index in the month.

Chen said the details of the report showed that Schwab's clients were rotating away from money market funds and into equity and fixed income products for the second month in a row.

Net new assets in February totaled $21.3 billion, including a $12 billion inflow related to a mutual fund clearing services client.

David Trone, an analyst at JMP Securities, said Schwab's trading levels and net new assets, minus the mutual fund clearing inflows, topped his expectations. He had expected $7.3 billion in net new assets.

E*Trade said on Wednesday its daily average revenue trades - a widely watched industry measure because it specifically shows revenue from trading fees and commissions - were down 9 percent from a year earlier, but up 16.2 percent from January, at 168,973.

David Chiaverini, an analyst at BMO Capital Markets, said he had expected a 10 to 15 percent month-over-month rise.

E*Trade said it added 18,120 net new brokerage accounts in February, ending the month with around 2.8 million. The New York-based company brought in $1.9 billion in net new brokerage assets in the month.

The company also gave an update on the delinquent loans in the legacy loan portfolio of its banking unit. It said loans that were delinquent 30 to 89 days were down 12 percent at the end of February from the end of December 2011, and down 9 percent from the end of January.

"We believe the solid performance in the brokerage unit combined with in line credit metrics make for a good monthly report," Chiaverini said in a note to clients. "We expect brokerage metrics to be favorable in the near term, given improving market sentiment."

Omaha-based TD Ameritrade said on Thursday that its daily average revenue trades were down 10 percent in February from a year earlier but up 9 percent from January, at 409,000.

Shares of Schwab, which are up around 27 percent year-to-date, were down 0.3 percent at $14.52 on Wednesday afternoon. E*Trade, which has risen around 28 percent so far this year, was up 3.6 percent at $10.41.

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