Interactive Brokers Reports $369m Revenues as Market Making Shrinks

The electronic brokerage unit of Interactive Brokers generated $310 million of revenues, while market making was down 83%.

Interactive Brokers (NASDAQ:IBKR) has reported on the financial outcome of its latest quarter as the company reported that its electronic brokerage business performed strongly, while market making declined materially year-on-year.

The U.S. brokerage has reported earnings per share totaling $0.36, with income before taxes coming in at $213 million, while net revenues amounted to $369 million. The company declared a $0.10 dividend per share.

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Net revenues were lower by 4.6 per cent, coming in at $369 million with income before income tax reported at $213 million this quarter, which is lower by 11 per cent when compared to a year ago.

Looking at quarter-on-quarter comparisons, net revenues were lower by almost 25 per cent, while income before income tax was down about 37 per cent.

The quarterly results in the second quarter were impacted positively by an increase in net interest income, which was higher by 17 per cent when compared to a year ago.

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Interactive Brokers (NASDAQ:IBKR) lost $2 million due to its currency diversification strategy, as the U.S. dollar strengthened somewhat during the quarter. During the same period in 2015, the company reported a $53 million gain.

Client Accounts Up to 357,000, Market Making Margins Shrink

Interactive Brokers (NASDAQ:IBKR) reported that the number of its clients has increased by 15 per cent when compared to a year ago, coming in at 357,000. The rise comes in tandem with increasing Daily Averages Revenue Trades (DARTs) which were higher by 5 per cent to 648,000. The Electronic Brokerage segment’s pretax profit margin for the quarter was 62 per cent, which is lower by 3 per cent when compared to last year and by 6 per cent when compared to the last quarter.

The market making pretax profit margin was materially lower from previous metrics, coming in at 12 per cent, when compared to 34 per cent in the last quarter and 42 per cent a year ago. Customer equity increased by 12 per cent from the same quarter last yearto $73.7 billion. The figure is also higher by 5 per cent when compared to the end of the first quarter of 2016.

Electronic Brokerage Ticks Higher

The Electronic Brokerage segment’s income before income tax ticked higher by a modest 2 per cent, coming in at $191 million. Net revenues increased sharply higher by 8 per cent to $310 million. The result has been largely due to higher net interest income and marked-to-market gains on the U.S. government securities portfolio of Interactive Brokers.

Market Making in the Doldrums

The Market Making segment of the business of Interactive Brokers (NASDAQ:IBKR) has suffered materially with income before income taxes coming in at $5 million, which is lower by 83 per cent when compared to a year ago.

Mixed trading volumes have been attributed to the rather modest increases in volatility and in the actual-to-implied volatility ratio. The pretax profit margin decreased to 12 per cent, which is a material decline when compared to last year’s 42 per cent.

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