Interactive Brokers’ stake in Chinese firm posts $185 million in float loss

abdelaziz Fathi

Interactive Brokers today reported third-quarter earnings that beat analysts’ expectations as the longtime leader in low-cost trading made gains in a couple of key areas, but its headline earnings missed estimates.

Ranked as the largest US electronic broker by some measures, Interactive Brokers’ third-quarter adjusted revenues rose 25 percent year-over-year, to $650 million compared to $518 million in Q3 2020.

On an adjusted basis, income before tax totaled $420 million, up 38 percent year-over-year from $304 million in the previous year. It was also 35 percent higher QoQ from $310 million in the second quarter. Diluted earnings per share came in at $0.78 for this quarter compared to $0.53 in Q3 2020.

Despite headwinds from a push to no-fee trading and historically low interest, Interactive Brokers’ commission revenue increased $32 million, or 11 percent from the year-ago quarter. The upbeat figure was attributed to higher customer trading volumes in stock and options markets.

The results for the quarter were also driven by strong growth in interest revenue, which increased $79 million, or 41 percent on a yearly basis. The increase was supported by higher margin loan balances and strong securities lending activity. However, this was offset by lower revenues in the “other income’ segment, which decreased $199 million, the company said in a statement.

Aside from its core electronic-brokerage business, the IB earnings for the third quarter included a mark-to-market loss of $185 million from its 7.7 percent stake in Tiger Brokers. This compares to the company’s $6 million float gain, which was tied to the Chinese brokerage in Q3 2020.

Under the other income section, Interactive Brokers also booked a $30 million loss related to currency diversification strategy, which lost $3 million this quarter compared to a gain of $27 million in the same period in 2020.

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 the number of fee-generating trades hit 2.260 million. That is 16 percent higher than the number of daily average revenue trades, or DARTS, reported in the same month a year ago. Additionally, the US-listed brokerage saw its DARTs increasing by 4 percent from the 2.17 million trades set back in August 2021.

In February, the discount broker’s DARTs hit an all-time high of 3.7 million amid a surge in activity from people stuck at home during the coronavirus pandemic.

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