Interactive Brokers Group, Inc.’s (IBKR - Analyst Report) second-quarter 2013 earnings of 21 cents per share came in line with the Zacks Consensus Estimate. Moreover, this compares favorably with the year-ago earnings of 17 cents.
Results improved on a year over year basis owing to an increase in Interactive’s top line along with a decline in operating expenses. Though the performance of the Electronic Brokerage segment depicted improvement, the overall results continue to be hampered by the Market Making segment’s performance.
Net income available to common shareholders was $10.3 million in the second quarter, increasing 28.8% from $8.0 million in the year-ago period.
Performance in Detail
Interactive’s total net revenue in the reported quarter came in at $283.9 million, up 8.8% year over year. However, net revenue was 3.8% lower than the Zacks Consensus Estimate of $295.0 million.
The rise in revenues was primarily attributable to an increase in commission and execution fees, interest income, other income and lower interest expense. However, this was partially mitigated by a decrease in trading gains.
Interactive’s net income before taxes in the reported quarter rose 23.4% year over year to $133.9 million. Similarly, pre-tax profit margin increased from 42% in the prior-year quarter to 47% in the reported quarter.
Total non-interest expenses were $150.0 million, down 1.6% from $152.4 million in the prior-year quarter. The decline was mainly due to lower execution and clearing expenses, employee compensation and benefits expenditure along with decline in occupancy, depreciation and amortization costs. However, these were partially offset by higher communications and general and administrative expenses.
Market Making: Net revenue plunged 26.2% from the prior-year quarter to $67.4 million. Similarly, pre-tax income decreased 68.3% year over year to $7.6 million. Moreover, pre-tax profit margin was 11%, down from 26% in the prior-year quarter.
Electronic Brokerage: Net revenue improved 24.0% year over year to $212.5 million. Likewise, pre-tax income stood at $123.3 million, increasing 36.7% from the year-ago quarter. Moreover, pre-tax profit margin was 58%, up from 53% in the prior-year quarter. Additionally, total daily average revenue trades (DARTs) for cleared-only customers increased 16.0% year over year to 463,000.
As of Jun 30, 2013, cash and cash equivalents (including cash and securities segregated for regulatory purposes) were $14.0 billion, down 1.0% from $14.1 billion as of Dec 31, 2012. Total assets were $35.1 billion, up 5.6% from $33.2 billion as of Dec 31, 2012.
Total equity came in at $4.9 billion compared with $4.8 billion as of Dec 31, 2012.
Concurrent with the earnings release, Interactive declared a quarterly cash dividend of 10 cents per share. The dividend will be paid on Sep 13 to shareholders of record as of Aug 30.
Performance of Other Investment Broker
The Charles Schwab Corporation’s (SCHW - Analyst Report) earnings of 18 cents per share missed the Zacks Consensus Estimate by a penny. Lower-than-expected results were due to increased operating expenses, partially offset by top-line growth and a benefit from provision.
Interactive’s robust fundamentals and a liquid balance sheet are expected to boost investors’ confidence in the stock. Further, the company’s strong market position and technological excellence are anticipated to act as tailwinds going forward.
Moreover, Interactive’s Market Making segment funds its dividend payments. However, this segment has been underperforming of late, which has made the company cautious about its ability to consistently generate sufficient returns to fund dividend payment.
Interactive currently holds a Zacks Rank #5 (Strong Sell).
Among other major investment brokers, TD Ameritrade Holding Corporation (AMTD - Analyst Report) is scheduled to report its fiscal third-quarter 2013 results on Jul 23 and E*TRADE Financial Corporation (ETFC - Analyst Report) is scheduled to report results on Jul 24.