Interactive Reports Mixed Metrics

Interactive Brokers Group Inc.’s (IBKR) Electronic Brokerage segment has announced its monthly brokerage data for March 2012. The segment under appraisal clears and settles trades globally for both individual and institutional clients.

Interactive’s total customer accounts for March were 194,500, up 16% from 167,900 in March 2011 and 1% from 192,200 in February 2012. However, total customer Daily Average Revenue Trades (DARTs) dipped 2% from the prior-year month and 7% from the prior month to 417,000.

During March, Interactive recorded diminished Cleared Customer DARTs of 384,000 compared with 390,000 in March 2011and 410,000 in February 2012. On an annualized basis, the company reported Cleared Average DART per customer account of 498,000, down from 592,000 in the comparable month last year and from 537,000 recorded in the previous month.

Further, Interactive’s total options contracts fell 19% from the prior-year month to 21,562 in March 2012, but it mounted 6% from the prior month. Also, during the reported month, the company’s futures contracts totaled 6,851, dwindling 18% from 8,309 in the year-ago month, but escalating 11% from 6,164 in the previous month.

Interactive also released period-end statistics for customer equity, customer credit balances and customer margin loan balances. For the period ended March 2012, customer equity stood at $28.9 billion, growing 17% year over year and 2% sequentially.

Moreover, Interactive’s Electronic Brokerage segment recorded customer margin loan balances of $8.4 billion in the reported month, shrinking 9% year over year, but rising 2% sequentially. The company’s customer credit balances of $18.8 billion at March 2012-end jumped 13% from $16.7 billion at March 2011-end and remained at par with the credit balances recorded at the end of February 2012.

Interactive remains well positioned with a stable balance sheet, robust capital base and high barriers to entry. Moreover, the company’s better-than-peer positioning and technological excellence is relatively impressive. However, colossally rising expenses is the major setback.

Despite continuous strong performances by Interactive’s Electronic Brokerage and the Market Making segments, we remain cautious over the steady generation of adequate returns by its Market Making segment to subsidize dividend payment.Also, the company’s dependence on IBG LLC and its wide international exposure is a matter of concern.

Currently, Interactive retains a Zacks #3 Rank, which translates into a short-term Hold rating. However, one of its peers, Knight Capital Group Inc. (KCG) retains a Zacks #4 Rank (short-term Sell rating).

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