Upgrade to SI Premium - Free Trial

Interactive Brokers Group Announces 3Q2019 Results

October 15, 2019 4:01 PM

Income Before Taxes of $281 Million on $466 Million in Net Revenues, Earnings Per Share on Net Income of $0.45 and Earnings Per Share on Comprehensive Income of $0.39.

Declares Quarterly Dividend of $0.10 Per Share.

GREENWICH, Conn.--(BUSINESS WIRE)-- Interactive Brokers Group, Inc. (NASDAQ GS: IBKR), an automated global electronic broker, reported diluted earnings per share on net income of $0.45 for the quarter ended September 30, 2019 compared to $0.51 for the same period in 2018, and diluted earnings per share on comprehensive income of $0.39 for the quarter, compared to $0.50 for the same period in 2018.

Net revenues were $466 million and income before income taxes was $281 million this quarter, compared to net revenues of $439 million and income before income taxes of $276 million for the same period in 2018. The results for the quarter were positively impacted by strong growth in net interest income, which increased $47 million, or 19%, and commissions revenue, which increased $20 million, or 12%, from the year-ago quarter; partially counterbalanced by lower other income, which decreased $40 million from the year-ago quarter.

The results for the quarter include a $47 million loss on our currency diversification strategy, compared to a $24 million loss in the same period in 2018; and a $13 million mark-to-market loss on our investment in Tiger Brokers.

The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on December 13, 2019 to shareholders of record as of November 29, 2019.

______________________________

1 Daily average revenue trades (DARTs) are based on customer orders.

Segment Overview

Electronic Brokerage

Electronic brokerage segment income before income taxes increased 13% to $331 million in the quarter ended September 30, 2019, compared to the same period last year. Net revenues increased 14% to $506 million on higher net interest income and commissions revenue, partially offset by lower other income.

Commissions revenue increased 12% from the year-ago quarter on higher customer trading volume in options and futures, and higher commissions per share in stocks. Net interest income increased 20% as average customer credit balances and benchmark interest rates increased from the year-ago quarter. Pretax profit margin was 65% for the quarter ended September 30, 2019, down from 66% in the same period last year.

Customer accounts grew 16% to 666 thousand and customer equity increased 10% from the year-ago quarter to $156.6 billion. Total DARTs for cleared and execution-only customers increased 13% to 859 thousand from the year-ago quarter. Cleared DARTs increased 12% to 777 thousand from the same period last year.

Market Making

Market making segment income before income taxes increased 14% to $8 million in the quarter ended September 30, 2019, compared to the same period last year, primarily due to higher net interest income from the remaining operations.

Corporate

For the quarter ended September 30, 2019, we recognized a mark-to-market loss of approximately $13 million in our strategic investment in Up Fintech Holding Limited (“Tiger Brokers”). For the nine months ended September 30, 2019 we recognized a net mark-to-market gain of $16 million on this investment.

Effects of Foreign Currency Diversification

In connection with our currency diversification strategy, we have determined to base our net worth in GLOBALs, a basket of 14 major currencies in which we hold our equity. In this quarter, our currency diversification strategy decreased our comprehensive earnings by $75 million, as the U.S. dollar value of the GLOBAL decreased by approximately 0.84%. The effects of the currency diversification strategy are reported as components of (1) Other Income in the corporate segment and (2) Other Comprehensive Income (“OCI”).

Regulatory Matters

The Company is subject to regulatory oversight and examination by numerous governmental and self-regulatory authorities. The Company is currently providing information to certain of such authorities, including FINRA, the SEC, the CFTC and the United States Department of Justice, and cooperating with those authorities. The Company believes that the regulators are focused on compliance practices, including anti money laundering and Bank Secrecy Act practices. The Company periodically reviews these practices to make them more robust and to keep pace with changing regulatory standards, and the Company has been enhancing and augmenting its procedures and personnel in these areas over the past several years. While the outcome of the examinations and inquiries currently in progress cannot be predicted, the Company does not believe that they are likely to have a materially adverse effect on the Company’s financial results.

Conference Call Information:

Interactive Brokers Group, Inc. will hold a conference call with investors today, October 15, 2019, at 4:30 p.m. ET to discuss its quarterly results. Investors who would like to listen to the conference call live should dial 877-324-1965 (U.S. domestic) and 631-291-4512 (international). The number should be dialed approximately ten minutes prior to the start of the conference call. Ask for the “Interactive Brokers Conference Call.”

The conference call will also be accessible simultaneously, and through replays, as an audio webcast through the Investor Relations section of the Interactive Brokers web site, www.interactivebrokers.com/ir.

About Interactive Brokers Group, Inc.:

Interactive Brokers Group affiliates provide automated trade execution and custody of securities, commodities and foreign exchange around the clock on over 125 markets in numerous countries and currencies, from a single IBKR Integrated Investment Account to customers worldwide. We service individual investors, hedge funds, proprietary trading groups, financial advisors and introducing brokers. Our four decades of focus on technology and automation has enabled us to equip our customers with a uniquely sophisticated platform to manage their investment portfolios at the lowest cost according to Barron's Best Online Brokers review, February 25, 2019. We strive to provide our customers with advantageous execution prices and trading, risk and portfolio management tools, research facilities and investment products, all at low or no cost, positioning them to achieve superior returns on investments.

Cautionary Note Regarding Forward-Looking Statements:

The foregoing information contains certain forward-looking statements that reflect the Company’s current views with respect to certain current and future events and financial performance. These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the Company’s operations and business environment which may cause the Company’s actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. Any forward-looking statements in this release are based upon information available to the Company on the date of this release. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. Additional information on risk factors that could potentially affect the Company’s financial results may be found in the Company’s filings with the Securities and Exchange Commission.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
OPERATING DATA

TRADE VOLUMES:
(in 000's, except %) Brokerage

Market Brokerage Non Avg. Trades

Making % Cleared % Cleared % Total % per U.S.

Period

Trades Change Trades Change Trades Change Trades Change Trading Day

2016

64,038

259,932

16,515

340,485

1,354

2017

31,282

(51%)

265,501

2%

14,835

(10%)

311,618

(8%)

1,246

2018

18,663

(40%)

328,099

24%

21,880

47%

368,642

18%

1,478

3Q2018

4,795

71,646

5,293

81,734

1,308

3Q2019

4,738

(1%)

78,793

10%

6,566

24%

90,097

10%

1,419

2Q2019

3,853

74,269

6,827

84,949

1,348

3Q2019

4,738

23%

78,793

6%

6,566

(4%)

90,097

6%

1,419

CONTRACT AND SHARE VOLUMES:

(in 000's, except %)

TOTAL

Options % Futures1 % Stocks %

Period

(contracts) Change (contracts) Change (shares) Change

2016

572,834

143,287

155,439,227

2017

395,885

(31%)

124,123

(13%)

220,247,921

42%

2018

408,406

3%

151,762

22%

210,257,186

(5%)

3Q2018

92,297

29,936

45,572,711

3Q2019

103,972

13%

36,124

21%

43,107,364

(5%)

2Q2019

96,007

32,424

42,995,205

3Q2019

103,972

8%

36,124

11%

43,107,364

0%

MARKET MAKING

Options % Futures1 % Stocks %

Period

(contracts) Change (contracts) Change (shares) Change

2016

307,377

14,205

13,082,887

2017

102,025

(67%)

5,696

(60%)

7,139,622

(45%)

2018

49,554

(51%)

3,277

(42%)

11,347,811

59%

3Q2018

11,805

758

2,995,942

3Q2019

10,848

(8%)

697

(8%)

2,082,317

(30%)

2Q2019

10,008

621

2,598,531

3Q2019

10,848

8%

697

12%

2,082,317

(20%)

BROKERAGE TOTAL

Options % Futures1 % Stocks %

Period

(contracts) Change (contracts) Change (shares) Change

2016

265,457

129,082

142,356,340

2017

293,860

11%

118,427

(8%)

213,108,299

50%

2018

358,852

22%

148,485

25%

198,909,375

(7%)

3Q2018

80,492

29,178

42,576,769

3Q2019

93,124

16%

35,427

21%

41,025,047

(4%)

2Q2019

85,999

31,803

40,396,674

3Q2019

93,124

8%

35,427

11%

41,025,047

2%

BROKERAGE CLEARED
Options % Futures1 % Stocks %
Period (contracts) Change (contracts) Change (shares) Change

2016

227,413

128,021

138,523,932

2017

253,304

11%

116,858

(9%)

209,435,662

51%

2018

313,795

24%

146,806

26%

194,012,882

(7%)

3Q2018

70,233

28,922

41,406,443

3Q2019

80,840

15%

35,108

21%

39,891,867

(4%)

2Q2019

71,524

31,564

39,086,399

3Q2019

80,840

13%

35,108

11%

39,891,867

2%

1 Includes options on futures.
BROKERAGE STATISTICS
(in 000's, except % and where noted)
Year over Year 3Q2019 3Q2018 % Change
Total Accounts

666

576

16%

Customer Equity (in billions)1

$

156.6

$

142.5

10%

Cleared DARTs

777

696

12%

Total Customer DARTs

859

763

13%

Cleared Customers (in $'s, except DART per account)
Commission per DART

$

3.69

$

3.78

(2%)

DART per Avg. Account (Annualized)

297

312

(5%)

Net Revenue per Avg. Account (Annualized)

$

2,995

$

3,109

(4%)

Consecutive Quarters 3Q2019 2Q2019 % Change
Total Accounts

666

645

3%

Customer Equity (in billions)1

$

156.6

$

153.1

2%

Cleared DARTs

777

740

5%

Total Customer DARTs

859

828

4%

Cleared Customers (in $'s, except DART per account)
Commission per DART

$

3.69

$

3.68

0%

DART per Avg. Account (Annualized)

297

293

1%

Net Revenue per Avg. Account (Annualized)

$

2,995

$

2,863

5%

1 Excludes non-customers.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
NET INTEREST MARGIN
(UNAUDITED)

Three Months Nine Months
Ended September 30, Ended September 30,

2019

2018

2019

2018

(in millions)
Average interest-earning assets
Segregated cash and securities

$

29,443

$

20,923

$

27,384

$

20,437

Customer margin loans

26,134

29,339

26,014

29,599

Securities borrowed

4,036

3,531

3,900

3,295

Other interest-earning assets

5,362

4,371

5,202

4,208

FDIC sweeps1

2,151

1,423

1,999

1,122

$

67,126

$

59,587

$

64,499

$

58,661

Average interest-bearing liabilities
Customer credit balances

$

53,762

$

48,544

$

51,786

$

47,954

Securities loaned

4,160

3,882

3,993

4,068

$

57,922

$

52,426

$

55,779

$

52,022

Net interest income
Segregated cash and securities, net

$

153

$

91

$

434

$

233

Customer margin loans2

175

182

537

485

Securities borrowed and loaned, net3

77

54

177

166

Customer credit balances, net2/3

(137)

(100)

(421)

(241)

Other net interest income1/4

31

25

94

63

Net interest income4

$

299

$

252

$

821

$

706

Net interest margin ("NIM")

1.77%

1.68%

1.70%

1.61%

Annualized yields
Segregated cash and securities

2.06%

1.73%

2.12%

1.52%

Customer margin loans

2.66%

2.46%

2.76%

2.19%

Customer credit balances

1.01%

0.82%

1.09%

0.67%

1

Represents the average amount of customer cash swept into FDIC-insured banks as part of our Insured Bank Deposit Sweep Program. This item is not recorded in the Company's consolidated statements of financial condition. Income derived from program deposits is reported in other net interest income in the table above.

2

Interest income and interest expense on customer margin loans and customer credit balances, respectively, are calculated on daily cash balances within each customer’s account on a net basis, which may result in an offset of balances across multiple account segments (e.g., between securities and commodities segments).

3

During the quarter ended December 31, 2018, we reclassified components of net interest income related to interest paid on short sale proceeds and as such, prior period amounts have been adjusted to conform to the current period presentation. For the three and nine months ended September 30, 2018, ($21) million and ($50) million have been reclassified from net interest income on “Securities borrowed and loaned, net” to “Customer credit balances, net”.

4

Includes income from financial instruments which has the same characteristics as interest, but is reported in other income in the Company’s consolidated statements of comprehensive income, of $8 million for the three months ended September 30, 2019 and 2018, and $25 million and $20 million for the nine months ended September 30, 2019 and 2018, respectively.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(UNAUDITED

Three Months Nine Months
Ended September 30, Ended September 30,

2019

2018

2019

2018

(in millions)
Electronic Brokerage Net revenues

$

506

$

444

$

1,435

$

1,352

Non-interest expenses

175

152

552

486

Income before income taxes

$

331

$

292

$

883

$

866

Pre-tax profit margin

65%

66%

62%

64%

Market Making Net revenues

$

17

$

16

$

52

$

59

Non-interest expenses

9

9

27

34

Income before income taxes

$

8

$

7

$

25

$

25

Pre-tax profit margin

47%

44%

48%

42%

Corporate 1 Net revenues

$

(57)

$

(21)

$

(50)

$

0

Non-interest expenses

1

2

13

4

Income (loss) before income taxes

$

(58)

$

(23)

$

(63)

$

(4)

Total Net revenues

$

466

$

439

$

1,437

$

1,411

Non-interest expenses

185

163

592

524

Income before income taxes

$

281

$

276

$

845

$

887

Pre-tax profit margin

60%

63%

59%

63%

1

Corporate includes corporate related activities as well as inter-segment eliminations and gains and losses on positions held as part of our overall currency diversification strategy.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)

Three Months Nine Months
Ended September 30, Ended September 30,

2019

2018

2019

2018

(in millions, except share and per share data)
Revenues:
Commissions

$

187

$

167

$

538

$

572

Interest income

468

363

1,308

1,007

Trading gains

7

7

20

32

Other income (loss)

(19)

21

83

121

Total revenues

643

558

1,949

1,732

Interest expense

177

119

512

321

Total net revenues

466

439

1,437

1,411

Non-interest expenses:
Execution, clearing and distribution fees

68

57

192

196

Employee compensation and benefits

67

63

213

201

Occupancy, depreciation and amortization

15

12

43

35

Communications

7

7

19

20

General and administrative

30

25

80

70

Customer bad debt

(2)

(1)

45

2

Total non-interest expenses

185

163

592

524

Income before income taxes

281

276

845

887

Income tax expense

20

18

50

52

Net income

261

258

795

835

Net income attributable to noncontrolling interests

225

219

678

709

Net income available for common stockholders

$

36

$

39

$

117

$

126

Earnings per share:
Basic

$

0.46

$

0.52

$

1.54

$

1.73

Diluted

$

0.45

$

0.51

$

1.52

$

1.71

Weighted average common shares outstanding:
Basic

76,742,789

74,649,469

75,910,080

72,879,007

Diluted

77,348,976

75,360,089

76,646,487

73,745,640

Comprehensive income:
Net income available for common stockholders

$

36

$

39

$

117

$

126

Other comprehensive income:
Cumulative translation adjustment, before income taxes

(6)

(1)

(3)

(14)

Income taxes related to items of other comprehensive income

-

-

-

(1)

Other comprehensive income (loss), net of tax

(6)

(1)

(3)

(13)

Comprehensive income available for common stockholders

$

30

$

38

$

114

$

113

Comprehensive income attributable to noncontrolling interests:
Net income attributable to noncontrolling interests

$

225

$

219

$

678

$

709

Other comprehensive income - cumulative translation adjustment

(22)

(2)

(11)

(60)

Comprehensive income attributable to noncontrolling interests

$

203

$

217

$

667

$

649

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
EARNINGS PER SHARE ON COMPREHENSIVE INCOME
(UNAUDITED)

Three Months Nine Months
Ended September 30, Ended September 30,

2019

2018

2019

2018

(in millions, except share and per share data)
Comprehensive income available for common stockholders

$

30

$

38

$

114

$

113

Comprehensive earnings per share:
Basic

$

0.39

$

0.51

$

1.50

$

1.55

Diluted

$

0.39

$

0.50

$

1.49

$

1.54

Weighted average common shares outstanding:
Basic

76,742,789

74,649,469

75,910,080

72,879,007

Diluted

77,348,976

75,360,089

76,646,487

73,745,640

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

September 30,
2019		 December 31,
2018
(in millions)
Assets
Cash and cash equivalents

$

3,035

$

2,597

Cash - segregated for regulatory purposes

8,794

7,503

Securities - segregated for regulatory purposes

21,246

15,595

Securities borrowed

4,010

3,331

Securities purchased under agreements to resell

1,391

1,242

Financial instruments owned, at fair value

1,883

2,119

Receivables from customers, net of allowance for doubtful accounts

25,970

27,017

Receivables from brokers, dealers and clearing organizations

868

706

Other assets

607

437

Total assets

$

67,804

$

60,547

Liabilities and equity
Liabilities
Short-term borrowings

$

15

$

17

Securities loaned

3,955

4,037

Financial instruments sold but not yet purchased, at fair value

977

681

Other payables:
Customers

54,474

47,993

Brokers, dealers and clearing organizations

245

298

Other payables

485

365

55,204

48,656

Total liabilities

60,151

53,391

Equity
Stockholders' equity

1,405

1,282

Noncontrolling interests

6,248

5,874

Total equity

7,653

7,156

Total liabilities and equity

$

67,804

$

60,547

September 30, 2019

December 31, 2018

Ownership of IBG LLC Membership Interests Interests % Interests %
IBG, Inc.

76,748,855

18.5%

75,100,955

18.1%

Noncontrolling interests (IBG Holdings LLC)

338,670,642

81.5%

338,691,717

81.9%

Total IBG LLC membership interests

415,419,497

100.0%

413,792,672

100.0%

For Interactive Brokers Group, Inc.

Investors:

Nancy Stuebe, 203-618-4070

Media: Kalen Holliday, 203-913-1369.

Source: Interactive Brokers Group, Inc.

Categories

Business Wire Press Releases

Next Articles