E*TRADE Financial (NASDAQ:ETFC) was one of last week's biggest winners.

The stock moved 16% higher on encouraging payout news and a subsequent analyst upgrade.

Regulators are clearing the payment of a $100 million dividend by its banking subsidiary to the parent company, a move that E*TRADE expects to continue on a quarterly basis.

Investors shouldn't expect cash dividends, here, but the reallocation process will give the online discounter the ability to pay down its debt.

More importantly, the clearance itself is a strong indicator that regulators feel E*TRADE's banking arm is on the mend. E*TRADE was one of the many financials services companies to get slammed a few years ago during the global crisis, weighed down by its subprime mortgage business.

The reallocation approval swayed Goldman Sachs into upgrade the stock, boosting its price target from $13.50 to $19.

Shares of E*TRADE have nearly doubled since bottoming out late last year, but it's not as if the broker itself is on a growth tear. Analysts see revenue actually declining this year, and clocking in flat next year. 

Larger rivals Charles Schwab (NYSE:SCHW) and TD AMERITRADE (NASDAQ:AMTD) are growing, but not by much. Analysts see single-digit percentage revenue growth at both companies this year and again in fiscal 2014. 

It isn't easy being a discount broker these days. Customers have come to expect low commission schedules and access to commission-free ETF trading. Low interest rates have also robbed E*TRADE of one of its earlier marketing angles, where it would offer substantially higher returns on savings accounts and idle cash.

This doesn't mean things aren't going well. E*TRADE closed out its latest quarter with 4.6 million customer accounts, including 3 million brokerage accounts. Daily average revenue trades are up 8% to 150,000 over the past year. Total customer assets have grown from $193 million last summer to $220 million now.

E*TRADE may also be in a good place if interest rates continue to inch higher. Sure, that would freeze bond traders and possibly cool stock investors. However, E*TRADE would once again be able to benefit from the high interest rates that it can offer savers. BofI (NASDAQ:BOFI) has seen its stock more than double over the past year as it rakes in the benefits of being a branchless bank. E*TRADE is in a similar position where it can pass on cost savings to customers in the form of more compelling rates than traditional banks.

E*TRADE's been a big winner last week and over the past year, but the good times don't have to end now. 


Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends BofI Holding and TD AMERITRADE. The Motley Fool owns shares of BofI Holding and TD AMERITRADE. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.