Interactive's August Metrics Slump

Interactive Brokers Group Inc.’s ( IBKR - Analyst Report ) Electronic Brokerage segment announced a decline in brokerage metrics for the month of August. The segment clears and settles trades globally for both individual and institutional clients.

Total customer Daily Average Revenue Trades (DARTs) declined 35.3% from August 2011 and 13.4% from July 2012 to 356,000. However, total customer accounts improved 12.2% from the prior-year month and 1.0% from the prior month to 203,600.

Interactive recorded Cleared Customer DARTs of 339,000, declining 33.1% from August 2011 and 11.5% from July 2012. Further, on an annualized basis, the company reported Cleared Average DART per customer account of 420,000, plunging 41% from 712,000 in the comparable month last year and 12.3% from 479,000 in the previous month.

Moreover, Interactive’s total options contracts plummeted 43.6% from the prior-year month and 2.3% from the prior month to 19,544 in the month under review. The company’s futures contracts totaled 7,223, decreasing 34.2% from 10,975 in August 2011, but rising 3.5% from 6,982 in July 2011.

Interactive also reported period-end statistics for customer equity, customer credit balances and customer margin loan balances. For the period ended August 2012, customer equity stood at $30.4 billion, augmenting 20.2% year over year and 4.1% sequentially.

Additionally, Interactive’s Electronic Brokerage segment recorded customer credit balances of $19.4 billion in the month, increasing 16.2% year over year and 3.7% sequentially. However, the company’s customer margin loan balances of $8.8 billion at August 2012-end jumped 18.9% from $7.4 billion at August 2011-end, and 2.3% from $8.6 billion at July 2012-end.

Lower trading activities and fluctuating interest rates are expected to continuously impact the company’s financials in the near term. In addition, the company’s dependence on IBG LLC and its wide international exposure make us apprehensive. However, we are impressed with Interactive’s better-than-peer positioning, technological excellence, stable balance sheet and robust capital base.

One of Interactive’s peers – Knight Capital Group, Inc. ( KCG - Snapshot Report ) is expected to announce its August metrics in mid-September.

Currently, Interactive retains a Zacks #5 Rank, which translates into a short-term Strong Sell rating.