Interactive Brokers (IBKR) reported fourth quarter earnings of 12 cents per share, which bested analysts estimates of six cents per share. That figure also represented 71 percent earnings growth over last year’s earnings of seven cents per share. On the other hand, revenue dropped by 17 percent to $208.1 million. Analysts were expecting $238.1 million in revenue from Interactive Brokers.
The market making segment saw net revenue of $53.6 million, which was down 30 percent from the same quarter a year ago. Pre-tax income in that segment dropped by 49 percent. Competition is tough in the market making space, and lower volatility in the stock market continues to hurt earnings in this area.
Earnings in the electronic brokerage segment were up significantly from last year. Revenue jumped by 23 percent. Pre-tax profit margin rose to 64 percent from 23 percent in the same period last year. Total Daily Average Revenue Trades (DARTs) helped drive this earnings growth, as DARTs jumped 25 percent in the fourth quarter.
Interactive Brokers was able to report higher earnings despite the drop in revenue thanks to much lower expenses. Non-interest expenses dropped by 37 percent compared to a year ago. This was mainly driven by lower employee compensation and benefits.
It should be noted that Interactive Brokers earnings moving forward will be hurt by the Swiss Franc move we blogged about recently. Thomas Peterffy, CEO of Interactive Brokers, said it was “nearly impossible” to forecast how much of traders’ losses the company would be able to recover. That’s a situation that certainly bears watching in the coming quarters.
Click here for the full fourth quarter earnings release from Interactive Brokers.