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Interactive Brokers (IBKR) Q4 Earnings Beat as Revenues Rise

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Interactive Brokers Group’s (IBKR - Free Report) fourth-quarter 2020 adjusted earnings per share of 69 cents outpaced the Zacks Consensus Estimate of 59 cents. Also, the bottom line reflects growth of 19% on a year-over-year basis.

An increase in daily average revenue trades (DARTs) and higher revenues primarily supported the results. However, rise in expenses and lower interest rates acted as headwinds.

After considering non-recurring items, net income available to common shareholders (GAAP basis) was $71 million or 81 cents per share, up from $44 million or 57 cents per share in the prior-year quarter.

Interactive Brokers reported comprehensive income available to common shareholders of $92 million or $1.05 per share in the reported quarter compared with $51 million or 66 cents recorded in the prior-year quarter.

In 2020, adjusted earnings of $2.49 per share beat the consensus estimate of $2.37 and increased from $2.27 recorded in 2019. On GAAP basis, net income available to common shareholders was $195 million or $2.42 per share, up from $161 million or $2.10 per share in 2019.

Revenues Improve, Expenses Rise

Total net revenues were $599 million, up 19.8% year over year. The rise was driven by higher non-interest income, mainly attributable to improvement in commissions. The top line beat the Zacks Consensus Estimate of $534.5 million. Adjusted revenues were $582 million, up 15.7%.

In 2020, total net revenues grew 14.5% to $2.22 billion. The figure surpassed the Zacks Consensus Estimate of $2.16 billion. Adjusted revenues of $2.20 billion were up 11.1%.

Total non-interest expenses increased 10.1% to $207 million. The rise was due to an increase in almost all cost components except for general and administrative expenses.

Income before income taxes was $392 million, increasing 25.6% from the prior-year quarter.

Adjusted pre-tax profit margin was 64%, up from 63%.

During the quarter, total customer DARTs increased significantly year over year to 2.11 million. Further, total cleared DARTs jumped from 0.72 million to 1.87 million.

Additionally, customer accounts grew 55.5% from the year-ago quarter to 1,073,000.

Capital Position Strong

As of Dec 31, 2020, cash and cash equivalents (including cash and securities set aside for regulatory purposes) totaled $48 billion compared with $30.1 billion on Dec 31, 2019.

As of Dec 31, 2020, total assets were $95.7 billion compared with $71.7 billion on Dec 31, 2019. Total equity was $9 billion, up from $7.9 billion.

Our Viewpoint

Interactive Brokers' efforts to develop proprietary software (including IBKR Lite) and planned strategic buyout of Folio Investments are expected to aid financials. Also, its efficient capital deployment activities indicate strong liquidity and capital position. However, mounting expenses (as witnessed in the fourth quarter as well) and low interest rate environment remain near-term headwinds.

Currently, Interactive Brokers carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

Performance and Upcoming Releases of Other Companies

Charles Schwab’s (SCHW - Free Report) fourth-quarter 2020 adjusted earnings of 74 cents per share beat the Zacks Consensus Estimate of 70 cents. Also, the bottom line grew 17% from the prior-year quarter, as the company reported first full-quarter results after closing TD Ameritrade deal in October 2020.

Raymond James (RJF - Free Report) and LPL Financial (LPLA - Free Report) are slated to release results for the September-end quarter on Jan 27 and Feb 4, respectively.

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