Interactive Brokers has today announced its corporate results for the third quarter of 2013.
The company arrived at the end of the quarter with a slight increase in share value, with diluted earnings per share on a comprehensive basis of $0.39 for the quarter ended September 30, 2013, compared to diluted earnings per share on a comprehensive basis of $0.30 for the same period in 2012.
According to Interactive Brokers, on a non-comprehensive basis, which excludes the effect of changes in the US dollar value of the company's non-U.S. subsidiaries, a diluted earnings per share on net income of $0.32 for the quarter ended September 30, 2013 was reported, compared to diluted earnings per share of $0.26 for the same period in 2012.
Net revenues were $326 million and income before income taxes was $196 million for this quarter, compared to net revenues of $319 million and income before income taxes of $173 million for the same period in 2012.
The Interactive Brokers Group board of directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on December 13, 2013 to shareholders of record as of November 29, 2013.
Business Highlights
The company recorded a 60% pretax profit margin for the third quarter of the year, with a 56% Electronic Brokerage pretax profit margin for the period.
Customer equity grew 31% compared to the same period last year to $41.4 billion, and customer debits increased by 38% to $12.7 billion, whilst customer accounts demonstrated a 13% increase over last year to 231,000.
Total DARTs increased 21% from the year-ago quarter to 471,000, and brokerage segment equity surpassed $2.4 billion. Total equity was $5.1 billion.
Interactive brokers has experienced a steady increase in volumes during recent months.
The company completed September’s trading period with further increases in performance over the month before, and significant year-on-year increments, including:
1) Ending customer equity of $41.4 billion, 31% higher than prior year and 4% higher than prior month.
2) Ending customer margin loan balances of $12.7 billion, 38% higher than prior year and 7% higher than prior month.
Certain aspects of the company's performance are attributable to specific criteria, which is displayed as follows:
Electronic Brokerage
Electronic brokerage segment income before income taxes increased 34% to $108 million, in the quarter ended September 30, 2013 compared to the same period last year. Commissions and Execution fees increased 20% from the year-ago quarter, reflecting growth in customer accounts and higher average trading activity per customer. Net interest income grew 19% from the year-ago quarter, to $56 million in this quarter. Pretax profit margin was 56% for this quarter, up from 48% in the same period last year.
Total DARTs for cleared and execution-only customers increased 21% to 471,000 from the year-ago quarter. Cleared DARTs were 426,000 in this quarter, 15% higher than the same period last year. Customer accounts increased by 13% compared to the third quarter of last year to 231,000. Customer equity increased 31% to $41.4 billion from the year-ago quarter, and customer margin borrowings were $3.5 billion higher than at the same time last year, ending the quarter at $12.7 billion.
Market-Making
Market-making segment income before income taxes decreased to $88 million for the quarter ended September 30, 2013, from $90 million for the same period in 2012. Removing the effects of currency translation, the Market-Making segment produced $41 million pretax income in this quarter, compared to $49 million for the same period last year. Decrease in profit was driven by a continued lackluster market-making environment marked by low Volatility and decreasing actual to implied volatility. The average CBOE Volatility Index, or VIX, edged down during this quarter.
Currency translation gain was $46 million in this quarter, compared to a $42 million gain in the year-ago quarter.
Effects of Foreign Currency Diversification
In connection with Interactive Brokers' currency strategy, the company has determined to base its net worth in GLOBALs, a basket of 16 major currencies in which it holds its equity. In this quarter, the company's currency diversification program increased its comprehensive earnings by $76 million, as the U.S. dollar value of the GLOBAL increased by approximately 1.5%.
The effects of currency diversification are reported as components of market-making trading gains and other comprehensive income ("OCI"). In this quarter, 61% of the global effect was captured in market-making trading gains in the net income section of the statement of comprehensive income, with the remainder reported as OCI in the separate comprehensive income section of the statement of comprehensive income.
