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Interactive Brokers (IBKR) Beats on Q3 Earnings, Costs Rise

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Interactive Brokers Group, Inc. (IBKR - Free Report) released third-quarter 2018 results. Earnings per share of 51 cents surpassed the Zacks Consensus Estimate of 49 cents. Also, the figure was higher than the prior-year quarter’s earnings of 43 cents per share.

Results benefited from an improvement in revenues and rise in DARTs. Further, the Electronic Brokerage segment continued to perform decently. However, higher expenses were a headwind.

The company reported comprehensive income available to common shareholders of $38 million or 50 cents per share, up from $32 million or 44 cents per share reported in the prior-year quarter.

Revenues Improve, Expenses Rise

Total net revenues for the reported quarter increased 3.1% year over year to $439 million. The rise was primarily driven by increase in commission fees and interest income, partially offset by lower trading gains, fall in other income and higher interest expenses. However, the figure lagged the Zacks Consensus Estimate of $453 million.

Total non-interest expenses increased 3.2% from the year-ago quarter to $163 million. The increase was primarily due to higher general and administrative costs.

Income before income taxes was $276 million in the quarter, up from $268 million in the prior-year quarter. Pre-tax profit margin was 63%, in line with the prior-year quarter.

Quarterly Segment Performance

Electronic Brokerage: Net revenues increased 21% year over year to $444 million. Pre-tax income rose 29.8% to $292 million. Total DARTs for cleared and execution-only customers were 763,000, up 10% from the year-ago quarter. Pre-tax profit margin improved to 66% from 61% in the prior-year quarter.

Market Making: Net revenues were $16 million, down from $30 million recorded in the prior-year quarter. Pre-tax income was $7 million, down 36.4% year over year. Pre-tax profit margin was 44% compared with 37% in the year-ago quarter.

The Corporate segment reported negative revenues of $21 million compared with revenues of $29 million in the year-ago quarter. Pre-tax loss was $23 million compared with pre-tax income of $32 million a year ago.

Capital Position

As of Sep 30, 2018, cash and cash equivalents (including cash and securities set aside for regulatory purposes) totaled $23.4 billion compared with $22 billion as of Dec 31, 2017. As of Sep 30, 2018, total assets amounted to $62.1 billion compared with $61.2 billion as of Dec 31, 2017. Total equity was $6.9 billion compared with $6.4 billion at the end of December 2017.

Our Take

While Interactive Brokers is poised to capitalize on growth scopes, backed by its market-leading position, technological advancement and optimization of resource allocation across global electronic networks, its high dependence on IBG LLC is a major concern. This is because, if IBG LLC fails to provide sufficient funds to pay taxes or for any other purpose, the company’s 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 #4 (Sell).

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 Oct 18, Oct 22 and Oct 25, respectively.

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