Interactive Brokers Group Inc.’s (IBKR - Analyst Report) Electronic Brokerage segment announced a decline in majority of the metrics for July 2012. The segment under evaluation clears and settles trades globally for both individual and institutional clients.
Interactive’s total customer Daily Average Revenue Trades (DARTs) declined 1% from July 2011 and 2% from June 2012 to 411,000. However, total customer accounts improved 13% from the prior-year month and 1% from the prior month to 201,500 in July.
In July, Interactive recorded Cleared Customer DARTs of 383,000, in line with June 2011 and down 2% from June 2012. Further, on an annualized basis, the company reported Cleared Average DART per customer account of 479,000, falling 12% from 546,000 in the comparable month last year and 3% from 493,000 in the previous month.
Moreover, Interactive’s total options contracts fell 9% from the prior-year month and 2% from the prior month to 20,008 in the month under review. The company’s futures contracts totaled 6,982, decreasing 2% from 7,148 in July 2011 and 17% from 8,409 in June 2011.
Interactive also reported period-end statistics for customer equity, customer credit balances and customer margin loan balances. For the period ended July 2012, customer equity stood at $29.2 billion, augmenting 12% year over year and 2% sequentially.
Additionally, Interactive’s Electronic Brokerage segment recorded customer credit balances of $18.7 billion in the reported month, increasing 10% year over year and 2% sequentially. However, the company’s customer margin loan balances of $8.6 billion at July 2012-end fell 2% from $8.8 billion at July 2011-end, but inched up 1% from $8.5 billion at the end of June 2012.
Interactive continues to retain a liquid balance sheet with a strong capital base. High barriers to entry further strengthen its position. Despite these positives, we remain concerned about the Market Making segment’s ability to consistently generate sufficient returns to fund dividend payment.
Also, the company’s dependence on IBG LLC and its wide international exposure remain the major causes of concern. Overall, Interactive’s better-than-peer positioning, technological excellence, stable balance sheet and robust capital base makes us optimistic.
Currently, Interactive retains a Zacks #5 Rank, which translates into a short-term Strong Sell rating. One of its peers, Knight Capital Group Inc. (KCG - Snapshot Report) retains a Zacks #4 Rank (short-term Sell rating).