Interactive Brokers’ earnings rise in Q1 2018 on the back of higher commissions

Maria Nikolova

The results for the quarter were positively impacted by strong growth in net interest income and higher commissions.

After a rough end to 2017, electronic trading major Interactive Brokers Group, Inc. (NASDAQ:IBKR) has managed to mark a rather robust start of 2018. The company has just posted its key financial and operating metrics for the first quarter of 2018, with profit and revenues staging a rise compared to the first quarter of 2017.

Diluted earnings per share on a comprehensive basis amounted to $0.65 in the quarter ended March 31, 2018, compared to diluted earnings per share on a comprehensive basis of $0.40 for the same period in 2017. Excluding other comprehensive income, Interactive Brokers reported diluted earnings per share of $0.63 for the quarter, compared to diluted earnings per share of $0.34 for the same period in 2017.

Net revenues were $527 million in the first three months of 2018, markedly higher than the net revenues of $374 million registered in the corresponding period in 2017. Income before income taxes was $340 million in the first quarter of 2018, compared to income before income taxes of $213 million for the same period in 2017.

The results for the quarter were positively impacted by strong growth in net interest income, which increased $75 million, or 53%, and higher commissions, which increased $66 million, or 43% from the year-ago quarter.

The electronic brokerage segment posted an income before income taxes of $291 million in the quarter ended March 31, 2018, up 57% from the same period last year. Net revenues increased 48% to $465 million on the back of higher net interest income and commissions revenue.

Net interest income increased 56% as average customer credit and margin loan balances and benchmark interest rates increased from the year-ago quarter. Commissions revenue increased 43% from the year-ago quarter on higher customer volumes in futures, options and stocks.

Operating metrics were also solid in the first three months of 2018, as the number of customer accounts grew 27% to 517,000 and customer equity increased 33% from the year-ago quarter to $129.2 billion. Total DARTs for cleared and execution-only customers increased 43% to 939,000 from the year-ago quarter. Cleared DARTs were 876,000, up 44% from the corresponding period in 2017.

The market making segment registered income before income taxes of $9 million in the quarter ended March 31, 2018, as compared to a pretax loss of $22 million in the year-ago quarter, during which Interactive Brokers started to wind down operations in this segment. The current quarter’s results reflect higher trading gains and lower operating costs on the remaining operations. Let’s recall that in the third quarter of 2017, Interactive Brokers completed the transfer of its US options market making business to Two Sigma Securities, LLC and by year-end it had exited the majority of its market making activities outside the United States.

Interactive Brokers’ Board of Directors announced a quarterly cash dividend of $0.10 per share, which is payable on June 14, 2018 to shareholders of record as of June 1, 2018.

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