Standard & Poor’s Downgrades Interactive Brokers Outlook to Stable
- Uncertainty over the length of COVID-19 and the potential for losses has led to the downgrade.
Standard & Poor's (S&P) Global Ratings announced on Monday that it has revised its outlook on BG LLC and its subsidiary Interactive Brokers LLC, downgrading it from positive down to stable.
At the same time, S&P has affirmed its 'BBB' issuer credit rating on IBG LLC and its 'BBB+' long-term and 'A-2' short-term issuer credit ratings on Interactive Brokers LLC.
"We revised the outlook to stable from positive to reflect that while we expect IBG to remain highly profitable and capitalized, uncertainty over the length and severity of COVID-19-related market and economic stress raises the potential for losses, to the extent that we are unlikely to raise our ratings on IBG until the COVID-19 threat has receded," S&P Global Ratings said in a statement today.
As Finance Magnates reported, Interactive Brokers posted an aggregate provisionary loss of approximately $88 million after US oil prices went negative last month.
S&P expects Interactive Brokers to maintain strong capitalization
The stable outlook provided by S&P reflects its expectation that IBG will maintain a very strong capitalization, as well as supportive profitability and Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term amid the Coronavirus Coronavirus The outbreak of Covid-19 or Coronavirus in early 2020 has since redefined the financial services industry. Brokers have been forced to quickly adapt to several changes, both positive and negative.This includes the FX industry, which saw surges in volumes across the retail and institutional space in Q1 2020. This trend can be explained by an outflow of volatility, coupled with countries taking major moves to stabilize their respective economies.In conjunction with uncertainty caused by the virus, The outbreak of Covid-19 or Coronavirus in early 2020 has since redefined the financial services industry. Brokers have been forced to quickly adapt to several changes, both positive and negative.This includes the FX industry, which saw surges in volumes across the retail and institutional space in Q1 2020. This trend can be explained by an outflow of volatility, coupled with countries taking major moves to stabilize their respective economies.In conjunction with uncertainty caused by the virus, Read this Term pandemic.
Overall, the credit rating agency expects that Interactive Brokers will maintain its RAC ratio well above 25 percent, gross stable funding ratio in excess of 110 percent, and a liquidity coverage metric above 90 percent.
All going well, over the next 12 to 24 months S&P may raise the ratings on IBG once the stress of the pandemic has lessened if it expects the firm's options market-making risk lessens, its new pricing option does not materially erode profitability, management remains committed to holding very strong levels of capital and if it sees a growth of less confidence-sensitive brokerage clients and shrinking market-making business to bolster its business and financial stability.
"Over the same time horizon, we could lower the ratings if we expect the firm's RAC ratio to weaken to below 20% or if its business displays less stability, higher risk, or losses, or a material decline in liquidity," the credit rating agency said today.
Standard & Poor's (S&P) Global Ratings announced on Monday that it has revised its outlook on BG LLC and its subsidiary Interactive Brokers LLC, downgrading it from positive down to stable.
At the same time, S&P has affirmed its 'BBB' issuer credit rating on IBG LLC and its 'BBB+' long-term and 'A-2' short-term issuer credit ratings on Interactive Brokers LLC.
"We revised the outlook to stable from positive to reflect that while we expect IBG to remain highly profitable and capitalized, uncertainty over the length and severity of COVID-19-related market and economic stress raises the potential for losses, to the extent that we are unlikely to raise our ratings on IBG until the COVID-19 threat has receded," S&P Global Ratings said in a statement today.
As Finance Magnates reported, Interactive Brokers posted an aggregate provisionary loss of approximately $88 million after US oil prices went negative last month.
S&P expects Interactive Brokers to maintain strong capitalization
The stable outlook provided by S&P reflects its expectation that IBG will maintain a very strong capitalization, as well as supportive profitability and Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term amid the Coronavirus Coronavirus The outbreak of Covid-19 or Coronavirus in early 2020 has since redefined the financial services industry. Brokers have been forced to quickly adapt to several changes, both positive and negative.This includes the FX industry, which saw surges in volumes across the retail and institutional space in Q1 2020. This trend can be explained by an outflow of volatility, coupled with countries taking major moves to stabilize their respective economies.In conjunction with uncertainty caused by the virus, The outbreak of Covid-19 or Coronavirus in early 2020 has since redefined the financial services industry. Brokers have been forced to quickly adapt to several changes, both positive and negative.This includes the FX industry, which saw surges in volumes across the retail and institutional space in Q1 2020. This trend can be explained by an outflow of volatility, coupled with countries taking major moves to stabilize their respective economies.In conjunction with uncertainty caused by the virus, Read this Term pandemic.
Overall, the credit rating agency expects that Interactive Brokers will maintain its RAC ratio well above 25 percent, gross stable funding ratio in excess of 110 percent, and a liquidity coverage metric above 90 percent.
All going well, over the next 12 to 24 months S&P may raise the ratings on IBG once the stress of the pandemic has lessened if it expects the firm's options market-making risk lessens, its new pricing option does not materially erode profitability, management remains committed to holding very strong levels of capital and if it sees a growth of less confidence-sensitive brokerage clients and shrinking market-making business to bolster its business and financial stability.
"Over the same time horizon, we could lower the ratings if we expect the firm's RAC ratio to weaken to below 20% or if its business displays less stability, higher risk, or losses, or a material decline in liquidity," the credit rating agency said today.