Interactive Brokers’ revenue rises 30% on robust interest income

abdelaziz Fathi

Interactive Brokers reported third-quarter earnings that came above analysts’ expectations as the longtime leader in low-cost trading made progress in a couple of key areas, thanks to choppy markets and rising rates.

Ranked as the largest US electronic broker by some measures, Interactive Brokers’ third-quarter adjusted revenues rose 30 percent year-over-year, to $847 million compared to $650 million in Q3 2021.

On an adjusted basis, income before tax totaled $580 million, up 38 percent year-over-year from $420 million in the previous year. Diluted earnings per share came in at $1.08 for this quarter compared to $0.78 in Q3 2021.

Despite headwinds from a push to no-fee trading, Interactive Brokers’ commission revenue increased 3 percent from the year-ago quarter to $320 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 $473 million, or 73 percent on a yearly basis. This was due to a decline in higher benchmark interest rates 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 third quarter included a mark-to-market loss of $171 million from its 7.7 percent stake in Tiger Brokers.

Under the other income section, Interactive Brokers booked $37 million in gains related to currency diversification strategy, and $7 million related to trading activities. 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 slight step back in September, an indication that investor confidence is still fairly mixed over the past few months.

During September 2022, the number of DARTs was reported at 1.961 million transactions, slightly down month-over-month from 1.968 million in August. Over a year-on-year basis, Interactive Brokers saw a notable drop in its DARTs with September’s figure down by 13 percent relative to 2.01 million reported in September 2021.

Elsewhere, the discount brokerage has won 25,000 new accounts as volatile markets had seemingly revived interest from retail investors. September’s active accounts increased to 2.01 million, or 1 percent higher from August and 31 percent above the previous year’s figure of 1.49 million ‎accounts. At this pace, Interactive Brokers has crossed the two million milestone for the first time in the company’s 44-year history.

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