Interactive Brokers’ electronic brokerage segment registers 13% rise in pre-tax income in Q3 2019

Maria Nikolova

The electronic brokerage segment income before income taxes increased 13% to $331 million in the quarter to end-September 2019, compared to the same period last year.

Online trading major Interactive Brokers Group, Inc. (NASDAQ:IBKR) has just posted its key financial and operating metrics for the third quarter of 2019.

During the three-month period to September 30, 2019, Interactive Brokers’ electronic brokerage segment saw income before income taxes increase 13% to $331 million, compared to the same period last year. Net revenues increased 14% from the year-ago quarter to $506 million on the back of higher net interest income and commissions revenue, partially offset by lower other income.

Commissions revenue grew 12% from the year-ago quarter thanks to higher customer trading volume in options and futures, and higher commissions per share in stocks. Net interest income increased 20% as average customer credit balances and benchmark interest rates increased from the year-ago quarter. Pretax profit margin was 65% for the quarter ended September 30, 2019, down from 66% in the same period last year.

Customer accounts grew 16% to 666,000 and customer equity increased 10% from the corresponding quarter a year ago to $156.6 billion. Total DARTs for cleared and execution-only customers increased 13% to 859,000 from the year-ago quarter. Cleared DARTs increased 12% to 777,000 from the same period last year.

Interactive Brokers’ market making segment registered solid results too, as income before income taxes staged an annual rise of 14% to $8 million in the third quarter of 2019, primarily due to higher net interest income from the remaining operations.

On the downside, for the quarter ended September 30, 2019, Interactive Brokers recognized a mark-to-market loss of approximately $13 million in its strategic investment in Up Fintech Holding Limited (“Tiger Brokers”). For the nine months ended September 30, 2019, Interactive Brokers recognized a net mark-to-market gain of $16 million on this investment.

Across all business segments, Interactive Brokers reported diluted earnings per share on net income of $0.45 for the quarter ended September 30, 2019 compared to $0.51 for the same period in 2018, and diluted earnings per share on comprehensive income of $0.39 for the quarter, compared to $0.50 for the same period in 2018.

Net revenues for the third quarter of 2019 were $466 million and income before income taxes was $281 million, compared to net revenues of $439 million and income before income taxes of $276 million for the same period in 2018.

The results for the third quarter of 2019 were positively impacted by the strong growth in net interest income, which increased $47 million, or 19%, and commissions revenue, which increased $20 million, or 12%, from the year-ago quarter. This was partially offset by lower other income, which decreased $40 million from the year-ago quarter.

The results for the quarter include a $47 million loss on Interactive Brokers’ currency diversification strategy, compared to a $24 million loss incurred in the same period in 2018.

The Board of Directors of Interactive Brokers declared a quarterly cash dividend of $0.10 per share. This dividend is payable on December 13, 2019 to shareholders of record as of November 29, 2019.

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