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Interactive Brokers (IBKR) Q2 Earnings Beat, DARTs Rise Y/Y

Zacks Equity Research

Interactive Brokers Group’s IBKR second-quarter 2020 adjusted earnings per share of 57 cents surpassed the Zacks Consensus Estimate of 30 cents. The figure reflects no change from the prior-year quarter earnings.

Increase in daily average revenue trades (DARTs) and higher revenues primarily supported the results. However, a rise in expenses acted as a headwind.

Results excluded certain non-recurring items. After considering these, net income was $207 million or 40 cents per share, down from $210 million or 43 cents per share in the prior-year quarter.

Interactive Brokers reported comprehensive income available to common shareholders of $36 million or 46 cents per share in the reported quarter, unchanged from the prior-year quarter.

Revenues Improve, Expenses Rise

Total net revenues were $539 million, up 30.5% year over year. The rise was driven by an increase in non-interest income. The top line surpassed the Zacks Consensus Estimate of $475.2 million. Adjusted revenues were $523 million, up 7.2% from the prior-year quarter.

Total non-interest expenses increased 68.6% from the year-ago quarter to $317 million. The rise was primarily due to a significant increase in general and administrative expenses.

Income before income taxes was $222 million, down 1.3% from the prior-year quarter.

Adjusted pre-tax profit margin was 59%, down from 61% a year ago.

Other Business Highlights

During the quarter, total DARTs increased significantly year over year to 1.75 million. Further, total cleared DARTs jumped from 0.74 million to 1.56 million.

Additionally, customer accounts grew 36% from the year-ago quarter to 876,000.

Strong Capital Position

As of Jun 30, 2020, cash and cash equivalents (including cash and securities set aside for regulatory purposes) totaled $49.2 billion compared with $30.1 billion on Dec 31, 2019.

As of Jun 30, 2020, total assets were $84 billion compared with $71.7 billion on Dec 31, 2019. Total equity was $8.3 billion compared with $7.9 billion at the end of December 2019.

Our Take

Continuously mounting operating expenses (as witnessed in the second quarter as well) will likely hurt the company’s bottom line to an extent in the near term. Also, because of lower interest rates, its revenues might get hampered. Nevertheless, its efforts to develop proprietary software (including IBKR Lite) will likely continue to support financials.

Interactive Brokers Group, Inc. Price, Consensus and EPS Surprise

 

Interactive Brokers Group, Inc. Price, Consensus and EPS Surprise
Interactive Brokers Group, Inc. Price, Consensus and EPS Surprise

Interactive Brokers Group, Inc. price-consensus-eps-surprise-chart | Interactive Brokers Group, Inc. Quote

Currently, Interactive Brokers carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance and Upcoming Releases of Other Investment Brokers

Charles Schwab’s SCHW second-quarter 2020 adjusted earnings of 54 cents per share lagged the Zacks Consensus Estimate of 55 cents. Also, the bottom line decreased 19% from the prior-year quarter.

E*TRADE Financial ETFC and Raymond James RJF are scheduled to announce quarterly results on Jul 23 and Jul 29, respectively.

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Interactive Brokers Group, Inc. (IBKR) : Free Stock Analysis Report
 
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The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report
 
Raymond James Financial, Inc. (RJF) : Free Stock Analysis Report
 
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