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Interactive Brokers (IBKR) Beats on Q2 Earnings, Costs Down

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Interactive Brokers Group, Inc. (IBKR - Free Report) released second-quarter 2018 results. Earnings per share of 58 cents surpassed the Zacks Consensus Estimate of 51 cents. Also, the figure was higher than prior-year quarter’s earnings of 32 cents per share.

Results benefited from an improvement in revenues and rise in DARTs along with lower expenses. Further, the Electronic Brokerage segment continued to perform decently.

The company reported comprehensive income available to common shareholders of $28 million or 39 cents per share, down from $29 million or 41 cents per share reported in the prior-year quarter.

Revenues Improve & Expenses Decline

Total net revenues for the reported quarter increased 15% year over year to $445 million. The rise was primarily driven by an increase in commission fees and interest income, partially offset by lower trading gains, fall in other income as well as higher interest expenses. The figure surpassed the Zacks Consensus Estimate of $437 million.

Total non-interest expenses decreased 4.9% from the year-ago quarter to $174 million. The decline was primarily due to lower general and administrative costs.

Income before income taxes was $271 million in the reported quarter, up from $204 million in the prior-year quarter. Similarly, the pre-tax profit margin was 61% compared with 53% in the prior-year quarter.

Quarterly Segmental Performance

Electronic Brokerage: Net revenues increased 32.6% year over year to $443 million. Pre-tax income rose 42.9% to $283 million. Total DARTs for cleared and execution-only customers were 797,000, up 19% from the year-ago quarter. Pre-tax profit margin improved to 64% from 59% in the prior-year quarter.

Market Making: Net revenues were $22 million, down from $23 million recorded in the prior-year quarter. Pre-tax income was $9 million compared with loss of $24 million in the year-ago quarter. Pre-tax profit margin was 41% compared with pre-tax loss margin of 104% in the prior-year quarter.

The Corporate segment reported negative revenues of $20 million compared with revenues of $30 million in the year-ago quarter. Pre-tax loss was $21 million compared with pre-tax income of $30 million in the year-ago quarter.

Capital Position

As of Jun 30, 2018, cash and cash equivalents (including cash and securities set aside for regulatory purposes) totaled $23.6 billion compared with $22 billion as of Dec 31, 2017. As of Jun 30, 2018, total assets amounted to $60.3 billion compared with $61.2 billion as of Dec 31, 2017. Total equity was $6.7 billion compared with $6.4 billion at the end of December 2017.

Our Take

Interactive Brokers is poised to capitalize on growth scopes, backed by its market-leading position, technological advancement and the optimization of resource allocation across global electronic networks. With the completion of the sale of its U.S. options-market-making business, the company plans to focus on strengthening its Electronic Brokerage segment. These restructuring efforts will likely support its financials in the future.

However, the company’s high dependence on IBG remains a concern. If IBG LLC fails to provide sufficient funds to pay taxes or for any other purpose, its financial condition may suffer.

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

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

Currently, Interactive Brokers carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases of Other Investment Brokers

We now look forward to E*TRADE Financial Corporation , TD Ameritrade Holding Corporation (AMTD - Free Report) and LPL Financial Holdings Inc. (LPLA - Free Report) , which are slated to report results on Jul 19, Jul 23 and Jul 26, respectively.

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