Interactive Brokers reports record revenues for Q4 2022

abdelaziz Fathi

Interactive Brokers reported largest-ever quarterly profit, buoyed by a favorable interest rate environment and an increasing user base.

The discount broker posted strong fourth-quarter earnings led by a recovery in interest income and its investment in Tiger Brokers. However, IBKR’s commission revenue was muted due to higher operating expenses and lower customer stock trading volume.

Ranked as the largest US electronic broker by some measures, Interactive Brokers’ fourth-quarter adjusted revenues rose 40 percent year-over-year, to $958 million compared to $683 million in Q4 2021.

On an adjusted basis, income before tax totaled $671 million, up 48 percent year-over-year from $453 million in the previous year. Diluted earnings per share came in at $1.30 for this quarter compared to $0.83 in Q4 2021.

Despite headwinds from a push to no-fee trading, Interactive Brokers’ commission revenue increased 3 percent from the year-ago quarter to $331 million. The growth was attributed to customer’s futures trading volume and higher options commission per contract. However, the figure was tempered partially by lower stock volume.

The upbeat results for the quarter were also driven by strong interest revenue, which jumped to $565 million, or 92 percent on a yearly basis. This was due to the aggressive interest rate hikes by the Federal Reserve and customer credit balances, partially offset by a decline in margin lending balances.

IBKR reports fewer monthly trades

Aside from its core electronic-brokerage business, the IBKR earnings for the fourth quarter included a mark-to-market gain of $58 million from its 7.7 percent stake in Tiger Brokers.

Under the other income section, Interactive Brokers booked $34 million in gains related to currency diversification strategy, and $6 million related to the remeasurement of its tax liability. Interactive Brokers holds its cash reserves in different currencies to reflect its global operations, which include significant overseas segments.

In terms of its operational metrics, Interactive Brokers said its trading volumes took a step back in the fourth quarter, an indication that investor confidence is still fairly mixed over the past few months.

During December 2022, the number of DARTs was reported at 1.751 million transactions, down from 1.96 million transactions in the month of November. Over a year-on-year basis, Interactive Brokers saw a larger drop in its DARTs with December’s figure down by 21 percent relative to 2.23 million reported in December 2021.

Elsewhere, the discount brokerage has won more than 25,400 new accounts. December’s active accounts increased to 2.09 million, or 1 percent higher from November and 25 percent above the previous year’s figure of 1.67 million ‎accounts.

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