Poland-based Forex and CFDs broker XTB has reported its final results for Q4 2019 and the full fiscal year ending on December 31, 2019, showing one of its most successful corporate earnings seasons.
XTB said its operating revenues were primarily influenced by the stock indices CFDs segment as the asset class generated 75 percent of the company’s total revenue compared to only 49 percent a year earlier. Meanwhile, revenues from FX CFDs amounted to 18.0 percent of total revenues relative to 23.5 percent in 2018. The EURUSD currency pair was the most popular instrument among XTB clients.
The listed-broker reported that its Q4 revenues increased by 109 percent year-over-year, driven by higher profitability per lot (from PLN 93 to PLN 227), which offset lower turnover that decreased from 458,869 to 394,147 lots.
Compared to a subdued performance during the previous year, where the industry players were broadly still feeling the pinch of change in ESMA regulations, XTB has seen noticeable gains in its financial figures. More specifically, during Q4 2019, XTB disclosed a total operating revenue of $23.4 million (PLN 89.57 million), which more than doubled year-over-year from $11.23 million (PLN 42.7 million) in Q4 2018.
In 2019, the retail business segment generated 88 percent of the group’s total volumes, while institutional traders commanded approximately 12 percent.
“In 2019 XTB introduced CFD instruments based on sector indices, such as biotechnologies, cannabis and technology companies to its offer. At the same time, the stock and ETF offer was constantly expanded by new instruments desired by clients. XTB is constantly developing its own xStation trading platform by adding new functionalities,” it further states.
The most significant change across XTB’s financial results came regarding its net profit, which rose sizably to $9.7 million (PLN 37.03 million) in Q4 2019, which is nearly eight times higher than the $1.1 million (PLN 3.97 million) it earned in 2018.
ESMA’s restrictions hit XTB volumes
Taking a yearly perspective, XTB reported a consolidated net profit of $14.89 million (PLN 57.7 million), down 43 percent when compared to PLN 101.5 million net profit a year earlier. Consolidated revenues amounted to PLN 239.3 million in 2019 compared to PLN 288.3 million a year earlier.
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This inconsistent performance is attributed to weak results in the first half of 2019, where the group posted only $1.34 million (PLN 5.2 million) in net profit, sharply lower than the PLN 115 million it revealed in the same period of 2018.
The company further explains that ESMA’s restrictions have had a more severe impact than most CFDs brokers anticipated.
“In 2019 the revenues decreased by 17,0 y/y i.e. PLN 48 997 thousand from PLN 288 301 thousand to PLN 239 304 thousand. One of the relevant factors which determined the level of revenues of XTB was the product intervention of ESMA. Coming into force in August 2018. Consequently, CFDs turnover in lots amounted to 1 597 218 lots compared to 2 095 412 a year earlier,” it further explains.
Although XTB has been particularly vulnerable to this shake-up, the company sees a unique opportunity to gain market share, with the new regulation from Esma creating a more level playing field for competition.
The company added that a natural consequence of ESMA’s rules should be a wave of consolidation on the market, allowing X-Trade Brokers to grow its market share in the European market.
“Small brokers, unable to withstand regulatory pressure and strong competition from larger brokers, will naturally disappear from the market. As a consequence, large brokers are expected to have a growing client base,” XTB said in its earnings report.
Finally, XTB also registered an increasing number of active accounts with 30,815 as of Q4 2019, growing steadily from 20,568 in Q4 2018, or 50 percent year-over-year. New accounts were also on the uptick, swelling 80 percent year-over-year to 10,424 in Q4 2019, relative to just 5,742 accounts in Q4 2018.