As the market goes, so goes E*Trade Financial (ETFC). E*Trade is a discount brokerage firm -- one of the first mainstream online discount brokers, in fact. Today, the firm's offerings reach beyond just retail brokerage: E*Trade is also a consumer bank, and provider of retirement services for large companies.
The decision to form a bank holding company was born out of necessity in 2008. The firm was leveraged to the brink, and it needed access to the cheap capital that Uncle Sam was providing that special class of financial services firms. But banking is extremely complementary to retail brokerage, and the cheap source of deposits for E*Trade should provide substantial return opportunities since it's able to make traditional loans as well as higher-interest margin loans for its investment customers.
In a big way, E*Trade's legacy business is a leveraged bet on the stock market. As retail investors become more engaged by upside in the S&P (and their accounts grow), ETFC should be able to generate more commission revenues. The firm has a balance sheet that's in solid shape in 2014, and it's got extra downside protection from equities thanks to its banking arm.
As interest rates get upwardly mobile, expect E*Trade's bottom line to grow materially.