Interactive Brokers’ electronic brokerage segment posts 23% Y/Y increase in pre-tax income in Q4 2018

Maria Nikolova

The electronic brokerage segment saw net revenues increase 26% to $490 million on the back of higher net interest income, commissions revenue and other income.

Online trading major Interactive Brokers Group, Inc. (IEX:IBKR) has just posted its key financial and operating metrics for the final quarter of 2018, with the data pointing to a rather robust three-month period for the electronic brokerage segment.

Electronic brokerage segment income before income taxes increased 23% to $311 million in the quarter ended December 31, 2018, compared to the equivalent period last year. Net revenues increased 26% to $490 million on the back of higher net interest income, commissions revenue and other income.

The segment marked a 20% year-on-year rise in net interest income as average customer credit and margin loan balances and benchmark interest rates increased from the year-ago quarter. Commissions revenue increased 21% from the year-ago quarter thanks to higher customer DARTs across all product types. Other income increased 104% on higher net mark-to-market gains on other investments and higher fees earned from our FDIC sweep program. Pretax profit margin was 63% for the quarter ended December 31, 2018, down from 65% in the same period last year.

Customer accounts grew 24% to 598,000 and customer equity increased 3% from the year-ago quarter to $128.4 billion, despite a 6% drop in the S&P 500 index for the year. Total DARTs for cleared and execution only customers increased 30% to a record high 951,000 from the year-ago quarter. Cleared DARTs were 856,000, 26% higher than in the same period last year.

Across all segments, Interactive Brokers registered net revenues of $492 million and income before income taxes was $309 million in the fourth quarter of 2018, compared to net revenues of $515 million and income before income taxes of $364 million for the same period in 2017. The results for the quarter were positively impacted by strong growth in net interest income, which increased $39 million, or 19%, and higher commissions, which increased $35 million, or 21%, from the year-ago quarter.

On the downside, the company marked an $18 million reversal on its currency diversification strategy, which swung from a $6 million gain in the year-ago quarter to a $12 million loss in the final quarter of 2018.

Furthermore, Interactive Brokers’ earnings for the year-ago quarter were significantly impacted by the Tax Cuts and Jobs Act, which revised U.S. corporate income tax law by, among other things, reducing the corporate income tax rate to 21% and implementing a modified territorial tax system that includes a onetime transition tax on deemed repatriated earnings of foreign subsidiaries. The results for the year-ago quarter were negatively impacted by the effects of the Tax Act, which decreased diluted earnings per share by $0.45.

For the year ended December 31, 2018, diluted earnings per share on net income were $2.28, compared to $1.07 in 2017, and diluted earnings per share on comprehensive income were $2.09, compared to $1.22 in 2017. The results for 2017 were negatively impacted by the effects of the Tax Act, which decreased diluted earnings per share by $0.46.

Net revenues were $1,903 million and income before income taxes was $1,196 million for 2018, compared to net revenues of $1,702 million and income before income taxes of $1,049 million in 2017.

Interactive Brokers’ Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on March 14, 2019 to shareholders of record as of March 1, 2019.

  • Read this next

    Retail FX

    Weekly Roundup: FX prop firms switch to cTrader, who moved $1.35B BTC?

    The foreign exchange and cryptocurrency markets are always active, and this past week was no exception. Stay ahead with a selection of essential stories and updates that matter most to market participants.

    Digital Assets

    Bitcoin breaks all records with a massive $1.347 billion transaction

    This transaction has surpassed previous records, setting a new benchmark for Bitcoin trades. Before this event, the largest Bitcoin transactions included a $1.1 billion trade in April 2020 involving 161,500 BTC, and other significant transactions ranging from $491 million to $1.033 billion throughout 2019 and 2020.

    Digital Assets

    Uniswap debuts Ethereum ‘uni.eth’ subdomains

    Decentralized exchange platform Uniswap has integrated Ethereum Name Service (ENS), allowing users to create human-readable domain names and cryptocurrency wallet addresses using .eth endings.

    Web3

    Magic Square Expands with TruePNL Acquisition

    Binance’s web3 app store, Magic Square, acquired token platform TruePNL in a cash deal this week for an undisclosed sum. The deal brings TruePNL’s infrastructure (excluding branding & token) under Magic Square’s wing. Initially seeking a partnership, Magic Square opted for a full acquisition.

    Crypto Insider

    The Future of Prediction Markets? Zeitgeist Launches Decentralized Court System

    Polkadot-powered prediction market protocol Zeitgeist has announced the launch of its latest innovation: a decentralized court system.

    Digital Assets

    Crypto exchange Kraken fires back at SEC lawsuit, claiming overreach

    Crypto exchange Kraken is pushing back against the U.S. Securities and Exchange Commission (SEC), seeking to toss out a lawsuit that accused the platform of operating without proper registration.

    Industry News

    Exness Named a Best Place to Work in 2024

     Global leader Exness, tops in retail trading volume, earns 2024 “Best Place to Work” award, cementing its employee-centric culture after three prior years of winning the Cyprus national title.

    Digital Assets

    Swan Bitcoin taps Bakkt for crypto offering in the US

    “We are thrilled to be taking this exciting step forward in our partnership with Swan. This is just the beginning of our collaboration, as we intend to explore further growth opportunities together in the future, including expansion into international markets.”

    Digital Assets

    Polkadot Awards Bifrost a 500,000 DOT Loan to Enhance Liquid Staking Adoption

    Bifrost, a leader in liquid staking solutions, has secured a 500,000 DOT loan from Polkadot’s treasury to expand the reach and utility of its vDOT product within the ecosystem.

    <