Interactive Brokers Nabs $548 Million in 3rd Quarter Revenues

On an adjusted basis, Interactive Brokers saw a drop in key metrics amid revenue fallout from low interest rates.

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 adjusted earnings missed estimates.

Ranked as the largest US electronic broker by some measures, Interactive Brokers’ third-quarter revenues rose 17 percent year-over-year, to $548 million compared to $466 million in Q3 2019. Further, the figure was higher from $523 million in the second quarter.

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Income before tax totaled $334 million is up 16 percent year-over-year from $281 million and was 50 percent higher QoQ from $222 million in the prior quarter.

However, on an adjusted basis Interactive Brokers saw a drop in key metrics amid continued revenue fallout from low interest rates. The listed brokerage earned adjusted profits of $304 million this quarter, or 53 cents per share, is down 10 and 7 percent, respectively, from $340 million and 57 cents for the third quarter of 2019. Adjusted net revenues also fell to $518 million, about -1.3 percent less than the $525 million it booked in the same period a year ago.

Despite headwinds from a push to commission-free trading and historically low interest, Interactive Brokers’ other income segment increased $76 million from a year ago.

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The results for the quarter were driven by strong growth in commission revenue, the company said in a statement, which increased $92 million, or 49 percent, from the quarter a year ago. The upbeat figure was attributed to higher customer trading volumes within an active trading environment worldwide.

However, this was offset by lower net interest income, which decreased $96 million, or 33 percent year-over-year, as the impact of the Fed’s dramatic monetary easing extended across the yield curve.

Specifically, the average interest rate decreased to 0.09% from 2.19% in Q3 2019, which reflects that compression in asset returns outweighed growth in client cash balances. In terms of equity balance in customers’ accounts during June 2020, the figure totaled at $232.7 billion in September 2020, which is up 49 percent relative to the prior year.

Aside from its core electronic-brokerage business, the IB earnings for the third quarter included a mark-to-market gain of $19 million from its 7.7 percent stake in Tiger Brokers. This reflects an improvement from the company’s $13 million float loss, which was tied to the Chinese brokerage in Q3 2019.

Under the other income section, Interactive Brokers also booked a $74 million gain related to currency diversification strategy, which gained $27 million this quarter compared to a loss of $13 million in the same period in 2019.

Interactive Brokers holds its cash reserves in different currencies to reflect its global operations, which include significant overseas segments.

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