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Interactive Brokers Group Announces 3Q2019 Results

GREENWICH, Conn.--(BUSINESS WIRE)--

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.

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.

  • 60% pretax profit margin for this quarter, down from 63% in the year-ago quarter.
  • 65% Electronic Brokerage pretax profit margin for this quarter, down from 66% in the year-ago quarter.
  • Customer equity grew 10% from the year-ago quarter to $156.6 billion and customer debits decreased 17% to $25.6 billion.
  • Customer accounts increased 16% from the year-ago quarter to 666 thousand.
  • Total DARTs1 increased 13% from the year-ago quarter to 859 thousand.
  • Brokerage segment equity was $6.5 billion. Total equity was $7.7 billion.

______________________________

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%

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20191015006048/en/