Interactive Brokers’ net interest income rose in the third quarter as larger client balances outweighed lower yields. The gain more than offset a sequential decline in commission revenue, lifting net revenue slightly above its second-quarter level.

Separately, the board raised the quarterly dividend by 71%. On an adjusted basis, net revenue reached $1.87 billion, pretax income was $1.45 billion and diluted earnings were $0.67 per share. The adjusted pretax margin narrowed to 78% from 79% a year earlier.

On an adjusted basis, net revenue reached $1.87 billion, while pretax income came in at $1.45 billion and diluted earnings were $0.67 per share. The adjusted pretax margin narrowed to 78% from 79%.

Larger Balances Offset Lower Interest Margins

Average customer margin loans reached $104.0 billion during the quarter, an increase of 47% from $70.8 billion a year earlier. Average customer credit balances rose 25% to $176.6 billion.

The expansion in balances lifted net interest income even as the profitability of those assets declined. Interactive Brokers’ net interest margin narrowed to 1.99% from 2.16% year over year.

The annualised yield on customer margin loans fell to 4.25% from 4.60%, while the yield on segregated cash and securities decreased to 3.40% from 3.81%. The figures indicate that growth came from the volume of client funds and borrowing rather than higher rates.

Trading Activity Falls from Second-Quarter Levels

Total DARTs averaged 4.27 million during the quarter. That was 18% higher than a year earlier but 11% below the second quarter. Commission revenue consequently declined from $673 million in Q2 to $602 million.

Compared with the previous year, customer futures volume increased 13%, while stock and options volumes fell 24% and 1%, respectively. Average commission per cleared commissionable order declined 4% to $2.59.

Higher regulatory charges also contributed to the annual increase in commission revenue. Execution, clearing and distribution expenses rose 46% to $134 million, largely because of a $30 million increase in regulatory fees following a higher SEC Section 31 transaction fee rate.

Interactive Brokers passes those fees through to customers.

The broker finished September with 5.58 million customer accounts and $964.7 billion in customer equity, representing annual increases of 35% and 27%, respectively.

Interactive Brokers’ board increased the quarterly dividend from $0.0875 to $0.15 per share. The dividend is payable on December 14 to shareholders of record on December 1.

This article was written by Tanya Chepkova at www.financemagnates.com.BrokersRead More

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