StockBrokers.com is closely monitoring the publicly-traded online brokers quarterly earnings reports. It’s no secret that 2012 was a difficult year for the online brokers in general due to the tough trading landscape and low trading volumes. Did the beginning of 2013 bring better news for online brokers or was it more of the same? We’ll look at some fast facts from each company’s earnings release, and then examine what it might mean for the industry as a whole. Here’s a look at first quarter results from TD Ameritrade (AMTD), E*TRADE (ETFC), Interactive Brokers (IBKR), and Charles Schwab (SCHW).
First, let’s take a look at how each company did in the first quarter of 2013 compared to the same quarter a year ago. TD Ameritrade earned 26 cents per share in the quarter, which was a penny better than the same quarter a year ago. E*TRADE earned 12 cents per share in the first quarter compared to a loss of 57 cents per share last year. E*TRADE’s first quarter number last year was hurt badly by a one-time charge. Interactive Brokers earnings plummeted from a level of 33 cents per share last year to 14 cents per share this year. Schwab earnings per share came in at 15 cents, which matched last year’s first quarter result.
TD Ameritrade 2013 1st Quarter Earnings Fast Facts:
Ameritrade’s earnings matched analysts estimates on the bottom line and slightly beat expectations on the top line.
Daily Average Revenue Trades (DARTs) were 378,000 per day in the quarter. That is down 2.4 percent from the same quarter a year ago.
TD Ameritrade reported record client assets of approximately $517 billion.
EBITDA was $279 million in the quarter, or 41 percent of total net revenues.
DARTs definitely held back TD Ameritrade’s growth in the quarter, and the company’s executives mentioned on the conference call that retail investors are still largely on the sideline. The 378,000 DARTs per day works out to an activity rate of about 6.5 percent. Net new client assets continued to grow strongly in the quarter, and TD Ameritrade has now gathered more than $170 billion in client assets during the past five years.
E*TRADE 2013 1st Quarter Earnings Fast Facts:
E*TRADE missed analysts estimates by almost $18 million on the top line. Revenues came in at $420 million versus an expected $438 million.
DARTs were 149,000 in the first quarter, which is down 5 percent from the same quarter a year ago.
The average commission per trade during the quarter was $11.30, which was the highest level in more than a year.
E*TRADE finished the quarter with $219 billion in total customer assets.
E*TRADE continues to make strides when it comes to reducing risk in the company’s large loan portfolio. E*TRADE appears to be doing a better job cutting costs. That is likely why the company was able to match analysts estimates on the bottom line despite light revenue numbers. The DARTs number was actually 16 percent higher than the fourth quarter, but that still isn’t particularly strong. The first quarter is typically one of the busiest of the year, but investors remain cautious.
Interactive Brokers 2013 1st Quarter Earnings Fast Facts
Revenue dropped 30 percent and net income fell 41 percent from a year ago. The company still managed to beat estimates by a penny on the bottom line.
The market making segment of this company really was to blame for the weak earnings. This segment lost $29 million compared to a profit of $66 million in the same quarter a year ago.
Growth was strong at the brokerage business. Interactive Brokers brought in $111 million in earnings from the brokerage business during the quarter.
Total DARTs were actually up nine percent from a year ago to a level of 465,000.
The headline looks really bad for Interactive Brokers, but the brokerage business actually did very well in the first quarter. Earnings at the electronic brokerage segment of this company increased 33% from last year. Commissions and execution fees increased 19 percent, which shows growth in customer accounts and average trade sizes. The two main problems for the company as a whole are the market making business and foreign currency exchange-rate issues.
Charles Schwab 1st Quarter Earnings Fast Facts:
Schwab missed analysts estimates by a penny this quarter.
Revenue from client trades totaled $223 million in the quarter, which was down nine percent from a year ago.
DARTs were down six percent from a year ago (they were up 12 percent from the fourth quarter).
Schwab continued to bring in new money at an impressive rate. The asset management division raked in $43.4 billion in net new assets.
Lower trading revenues was the main factor for Schwab’s slight earnings miss. Only 17 percent of Schwab’s profits came from money from client trades. Just a few years ago, that number was routinely above 50 percent. Schwab reiterated estimates for somewhere in the mid 70 cent range for full year earnings this year. Clients opened 244,000 new brokerage accounts in the quarter. Schwab ended the quarter with a record $2.08 trillion in total client assets. The pre-tax profit margin at Schwab came in at 25.7 percent.
Overall, the broad problem of cautious retail investors not getting involved in the market is still holding down earnings at the online brokers. Still, it is apparent that these companies are getting better at diversifying their revenue sources. Also, total client assets have grown nicely at all four of these companies. At some point, investors are going to want to put their money to work. How has the stock market responded to these earnings numbers? IBKR and ETFC are both up more than 5 percent since their releases, while SCHW and AMTD are up very slightly. Stockbrokers.com will take a look at second quarter earnings from this key sector in about three months.