Interactive's May Metrics Improve

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

Interactive’s total customer accounts improved 14% from the prior-year month and 1% from the prior month to 198,100 in May. Likewise, total customer Daily Average Revenue Trades (DARTs) surged 7% from May 2011 and 9% from April 2012 to 449,000.

During May, Interactive recorded an upsurge in Cleared Customer DARTs of 420,000 compared with 392,000 in May 2011and 383,000 in April 2012. On an annualized basis, the company reported Cleared Average DART per customer account of 534,000, down from 574,000 in the comparable month last year but up from 492,000 recorded in the previous month.

Further, Interactive’s total options contracts rose 9% from the prior-year month and 13% from the prior month to 22,513 in the month under review. Also, the company’s futures contracts totaled 8,580, escalating 24% from 6,896 in the year-ago month and 25% from 6,890 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 May 2012, customer equity stood at $27.6 billion, growing 6% year over year, but falling 5% sequentially.

Moreover, Interactive’s Electronic Brokerage segment recorded customer credit balances of $17.9 billion in the reported month, increasing 4% year over year, but declining 5% sequentially. However, the company’s customer margin loan balances of $8.2 billion at May 2012-end fell 14% from $9.5 billion at May 2011-end and 6% from $8.7 billion at the end of April 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, colossal expenses remain 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 in order to subsidize dividend payment. Also, the company’s dependence on IBG LLC and its wide international exposure remain major causes of concern.

Currently, Interactive retains a Zacks #5 Rank, which translates into a short-term Strong Sell rating. However, one of its peers, Knight Capital Group Inc. (KCG - Snapshot Report) retains a Zacks #3 Rank (short-term Hold rating).