E*Trade reports higher monthly trading volume

NEW YORK, June 18 (Reuters) - E*Trade Financial Group Inc (ETFC.O) on Wednesday reported its average daily trading volume rose 4.1 percent in May from a month before, slightly outperforming its rivals TD Ameritrade (AMTD.O) and Charles Schwab Corp (SCHW.O).

Average daily trading volume, a key indicator in the on-line brokerage industry, increased 10 percent from a year earlier while its retail customer assets were up 3.9 percent month over month.

But its retail customer assets were still down 15.6 percent over a year before. In November, customers fled in large numbers after E*Trade's holdings in risky mortgage securities generated big losses.

At a Sandler O'Neill conference earlier this month, E*Trade's Chief Executive Donald H. Layton said the brokerage was focusing on its main brokerage business as if there was no crisis. Since November, the company has eliminated businesses such as its U.S. institutional sales business to improve its balance sheet.

"It shows their core business is intact," Patrick O'Shaughnessy, an analyst with Chicago-based Raymond James, said of the monthly results. "But they still have a lot of balance sheet issues to work through."

The company plans to reduce its debt by $700 million by year's end.

While overall industry trading volumes were surprisingly robust in May, O'Shaughnessy attributes E*Trade's slight outperformance of its rivals to heavy spending on an advertising campaign. (Reporting by Phil Wahba, editing by Maureen Bavdek)