Interactive Brokers’ electronic brokerage segment marks 7% rise in pre-tax income in Q2 2019

Maria Nikolova

The electronic brokerage segment income before income taxes increased 7% to $302 million in the quarter ended June 30, 2019, compared to the same period last year.

Online trading major Interactive Brokers Group, Inc. (IEX:IBKR) has just posted its key performance metrics for the second quarter of 2019.

The electronic brokerage segment registered 7% year-on-year rise in income before income taxes to $302 million in the quarter ended June 30, 2019. The segment saw net revenues increase 7% to $473 million on the back of higher net interest and other income, partially offset by lower commissions revenue.

Commissions revenue decreased 4% from the year-ago quarter on lower customer trading volume across most product types, which reflected smaller average trade sizes. Net interest income increased 16% as average customer credit balances and benchmark interest rates increased from the year-ago quarter. Other income increased 3% on higher net mark-to-market gains on our U.S. government securities portfolio and higher fees earned from our Insured Bank Deposit Sweep Program. Pretax profit margin was 64% for the quarter ended June 30, 2019, unchanged from the same period last year.

Customer accounts grew 19% to 645,000 and customer equity increased 14% from the year-ago quarter to $153.1 billion. Total DARTs for cleared and execution-only customers increased 4% to 828,000 from the year-ago quarter. Cleared DARTs were 740,000, slightly higher than the same period last year.

The market making segment registered income before income taxes of $11 million, up 22% from same three-month period last year, primarily due to lower operating costs in the remaining operations.

For the quarter ended June 30, 2019, Interactive Brokers recognized a mark-to-market loss of approximately $74 million in its strategic investment in Up Fintech Holding Limited (“Tiger Brokers”), compared to a mark-to-market gain of $103 million recognized in the first quarter of 2019 after its initial public offering on March 20, 2019.

Across all segments, Interactive Brokers reported diluted earnings per share on net income of $0.43 for the quarter to end-June 2019 compared to $0.57 for the same period in 2018, and diluted earnings per share on comprehensive income of $0.46 for the quarter, compared to $0.39 for the same period in 2018.

Net revenues were $413 million and income before income taxes was $225 million this quarter, compared to net revenues of $445 million and income before income taxes of $271 million for the same period in 2018.

The results for the second quarter of 2019 were positively impacted by strong growth in net interest income, which increased $34 million, or 15%, from the year-ago quarter; partially counterbalanced by lower commissions revenue, which decreased $7 million, or 4%, from the year-ago quarter. The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on September 13, 2019 to shareholders of record as of August 30, 2019.

Interactive Brokers did not provide an update on the so-called margin loans “incident”.

Over an extended period in 2018, a small number of Interactive Brokers’ brokerage customers had taken relatively large positions in a security listed on a major US exchange. The company extended margin loans against the security at a conservatively high collateral requirement. In December 2018, within a very short timeframe, this security lost a substantial amount of its value. During the quarter ended March 31, 2019, subsequent price declines in the stock have caused these accounts to fall into deficits, in the face of the company’s efforts to liquidate the customers’ positions.

For the quarter ended March 31, 2019, as previously guided, Interactive Brokers has recognized an aggregate loss of approximately $42 million. In its 10-Q report, Interactive Brokers explains that the maximum aggregate loss, which would occur if the security’s price fell to zero and none of the debts were collected, would be approximately $51 million.

Read this next

Retail FX

ThinkMarkets expands CFDs lineup to over 4000 ETFs and shares

ThinkMarkets has expanded its service offering by incorporating 2500 new CFDs on shares and ETFs on its ThinkTrader platform.

Retail FX

France regulator warns investors of Omega Pro,

France’s financial markets regulator alerted investors that scams related to Omega Pro Ltd are beginning to circulate, with the blacklisted firm capitalizing on the situation to run a range of “unrealistic” offers.

Digital Assets

Web3 platform Grand Time paid $2 million in token earnings to date

Community-driven Web3 platform Grand Time said its offering – which includes a multifaceted platforms and its native token – has been gaining significant traction highlighted by impressive operational metrics.

Institutional FX

FX volumes at MOEX halved in April as ruble gains gorund

Currency trading at Moscow Exchange (MOEX) halted its upward route in April as monthly volumes nearly halved from a month earlier.

Digital Assets

FTX US adds stock trading, fractional shares to crypto platform

FTX US, the American subsidiary of crypto exchange FTX has kicked off stock trading feature to its customers in an effort to compete with popular platforms such as Robinhood and eToro.

Industry News

UK FCA empowered to remove brokers’ permissions in 28 days

Businesses with permissions they don’t need or use, risk misleading consumers. These new powers will enable us to take quicker action to cancel permissions that are not used or needed.

Industry News

CFTC charges $44m Ponzi scheme but millions may have fled to foreign crypto exchange

The CFTC alleged that defendants transferred millions of dollars to an off-shore entity that, in turn, may have transferred funds to a foreign cryptocurrency exchange. None of these funds were returned to the pool.


Saxo Bank deploys Adenza to address Basel and EBA requirements

The integration of ControllerView will enhance Basel-driven capital calculations and reporting at Saxo Bank in support of the bank’s multijurisdictional capital and liquidity reporting requirements throughout Denmark, Switzerland and UK, with plans to expand into the Netherlands.

Executive Moves

ComplySci appoints CTO, CPO, and CLO to further regtech’s product expansion

ComplySci offers compliance software used by more than 1400 global institutions to identify risk and address regulatory compliance challenges.