Interactive Brokers Group Reports Weak Q1 2015 due to Black Thursday Losses

The results of the first quarter were negatively impacted by a $121 million net loss due to the sudden move

Interactive Brokers Group, Inc. (NASDAQ GS: IBKR) an online broker and market maker, today reported diluted earnings per share on a comprehensive basis of ($0.24) for the quarter ending March 31, 2015, compared to diluted earnings per share on a comprehensive basis of $0.35 for the same period in 2014.

Net revenues were $172 million, and the loss before income taxes was $111 million this quarter, compared to net revenues of $355 million and $218 million before income taxes for the same period in 2014.

The results for the first quarter of 2015 were negatively impacted by a $121 million net loss due to the sudden move in the value of the Swiss franc, causing several customers who held currency futures and spot positions to suffer losses in excess of their deposits; and a $197 million loss on the broker’s currency diversification strategy due to the strengthening of the U.S. dollar against other major currencies.

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The broker’s board of directors also declared a quarterly cash dividend of $0.10 per share, payable on June 12, 2015 to shareholders of record as of June 1, 2015.

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Business Highlights for Q1:

  • 18% Electronic Brokerage pretax profit margin for this quarter, or 63% excluding the negative impact of the sudden move in the value of the Swiss franc.
  • 40% Market Making pretax profit margin for this quarter, down from 59% in the year-ago quarter.
  • Customer equity grew 25% from the year-ago quarter to $61.2 billion, and customer debits increased by 20% to $17.3 billion.
  • Customer accounts increased 17% from the year-ago quarter to 296 thousand.
  • Total DARTs increased 11% from year-ago quarter to 648 thousand.
  • Brokerage segment equity was $3.1 billion. Total equity was $5.0 billion.

As already disclosed in the Interactive Brokers Group’s annual report, the unprecedented action by the Swiss National Bank on January 15, 2015, caused several of its customers who held currency futures and spot positions to suffer losses in excess of their deposits.

Interactive Brokers Group commented today: “We took immediate action to hedge our exposure to the foreign currency receivables from these customers. During the first quarter of 2015, we incurred losses, net of hedging activity, of $121 million. We are actively pursuing collection of these debts. The ultimate effect of this incident on our results will depend upon the outcome of our debt collection efforts.”

“In connection with our currency strategy, we have determined to base our net worth in GLOBALs, a basket of 16 major currencies in which we hold our equity. In this quarter, our currency diversification strategy decreased our comprehensive earnings by $197 million, as the U.S. dollar value of the GLOBAL decreased by approximately 3.8%.”

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