Interactive Brokers Nabs $548 Million in 3rd Quarter Revenues

Interactive Brokers today reported third-quarter earnings that beat analysts’ expectations as the longtime leader in low-cost trading made gains in a couple of key areas, but its adjusted earnings missed estimates.

Ranked as the largest US electronic broker by some measures, Interactive Brokers’ third-quarter revenues rose 17 percent year-over-year, to $548 million compared to $466 million in Q3 2019. Further, the figure was higher from $523 million in the second quarter.

Income before tax totaled $334 million is up 16 percent year-over-year from $281 million and was 50 percent higher QoQ from $222 million in the prior quarter.

However, on an adjusted basis Interactive Brokers saw a drop in key metrics amid continued revenue fallout from low interest rates. The listed brokerage earned adjusted profits of $304 million this quarter, or 53 cents per share, is down 10 and 7 percent, respectively, from $340 million and 57 cents for the third quarter of 2019. Adjusted net revenues also fell to $518 million, about -1.3 percent less than the $525 million it booked in the same period a year ago.

Despite headwinds from a push to commission-free trading and historically low interest, Interactive Brokers’ other income segment increased $76 million from a year ago.

The results for the quarter were driven by strong growth in commission revenue, the company said in a statement, which increased $92 million, or 49 percent, from the quarter a year ago. The upbeat figure was attributed to higher customer trading volumes within an active trading environment worldwide.

However, this was offset by lower net interest income, which decreased $96 million, or 33 percent year-over-year, as the impact of the Fed’s dramatic monetary easing extended across the Yield Yield A yield is defined as the earnings generated by an investment or security over a particular time period. This is in typically displayed in percentage terms and is in the form of interest or dividends received from it.Yields do not include the price variations, which differentiates it from the total return. As such, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as a A yield is defined as the earnings generated by an investment or security over a particular time period. This is in typically displayed in percentage terms and is in the form of interest or dividends received from it.Yields do not include the price variations, which differentiates it from the total return. As such, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as a Read this Term curve.

Specifically, the average interest rate decreased to 0.09% from 2.19% in Q3 2019, which reflects that compression in asset returns outweighed growth in client cash balances. In terms of equity balance in customers’ accounts during June 2020, the figure totaled at $232.7 billion in September 2020, which is up 49 percent relative to the prior year.

Aside from its core electronic-brokerage business, the IB earnings for the third quarter included a mark-to-market gain of $19 million from its 7.7 percent stake in Tiger Brokers. This reflects an improvement from the company’s $13 million float loss, which was tied to the Chinese brokerage in Q3 2019.

Under the other income section, Interactive Brokers also booked a $74 million gain related to currency diversification strategy, which gained $27 million this quarter compared to a loss of $13 million in the same period in 2019.

Interactive Brokers holds its cash reserves in different currencies to reflect its global operations, which include significant overseas segments.