StockBrokers.com continues to closely monitor the publicly-traded online brokers quarterly earnings reports. The online brokers had a difficult time in 2012 and in the first quarter of 2013. Did the second quarter bring any better results from the online brokers? We’ll take a look at some fast facts from each company’s quarterly results, and then explore what it might mean for the industry overall. Here’s a look at second quarter earnings results from TD Ameritrade (AMTD), E*TRADE (ETFC), Charles Schwab (SCHW), and Interactive Brokers (IBKR).
First of all, we’ll take a look at how each online broker did in the second quarter of 2013 compared to how they did in the same quarter a year ago. TD Ameritrade earned 33 cents this past quarter, which was a nickel higher than the amount they earned a year ago. E*TRADE reported earnings of 21 cents per share versus a profit of 14 cents last year. Charles Schwab reported earnings of 19 cents per share, which came up a penny short of last year’s profit of 20 cents per share. Interactive Brokers reported a bottom line profit of 21 cents per share, which was four cents above their profit from the same quarter in 2012.
TD Ameritrade 2013 2nd Quarter Earnings Fast Facts:
TD Ameritrade reported revenue of $725 million in the quarter, which marked the highest revenue number this company has ever reported.
Daily Average Revenue Trades (DARTs) were 399,000 during the quarter. This was 12 percent higher than a year ago.
Ameritrade announced it will hire 50 to 100 salespeople for its branches in the third quarter.
10 percent of daily trades completed through TD Ameritrade were generated on mobile devices in the second quarter.
TD Ameritrade had been hurt by slower trading volume in previous quarters, but the second quarter of 2013 was the most active quarter for TD Ameritrade users in the past two years. Earnings in the second quarter exceeded analysts estimates by two cents on the bottom line and by nearly $20 million on the top line. Shares of TD Ameritrade are currently trading right at their 52 week high on the heels of this positive earnings news from the company.
E*TRADE 2013 2nd Quarter Earnings Fast Facts:
E*TRADE reported a profit of 21 cents per share before one-time charges, but with those charges the company actually lost 19 cents per share.
DARTs were 150,000 during the quarter, which was eight percent higher than the same quarter a year ago.
Brokerage account attrition matched a record low for the company at 8.4 percent in the second quarter.
E*TRADE announced it will exit the struggling market making business. This exit is the reason for the one-time charges in the second quarter results.
E*TRADE reported second quarter revenue of $440 million. Analysts were expecting revenue of only $422 million. E*TRADE ended the second quarter with total customer assets of $220 billion. Provisions for loan losses fell to $46 million as the company continues to clean up its balance sheet. Shares of ETFC jumped more than 8 percent the day after these results were reported. The stock is now at its highest level in nearly two years.
Charles Schwab 2013 2nd Quarter Earnings Fast Facts:
Schwab actually missed analysts estimates by a penny on the bottom line in the second quarter.
Expenses rose nine percent from a year ago, and that was the primary reason for the earnings miss.
Charles Schwab reported a pre-tax profit margin of 30.8% in the second quarter, down from 33.7% in the same quarter last year.
Net new accounts totaled 47,000 in the second quarter, which is 18% higher than a year ago.
Higher expenses held back Schwab in this quarter. The comparison to last year for Schwab is actually not an apples to apples comparison. During the second quarter of 2012, Schwab reported a one-time gain that boosted earnings. Excluding that gain, Schwab’s net income was up 11% from a year ago, so the company is continuing to increase its bottom line. Schwab executives said during the earnings call that the company will continue to increase spending on advertisements aimed at selling the brokers “advice” products.
Interactive Brokers 2013 2nd Quarter Earnings Fast Facts:
Interactive Brokers missed analysts estimates on the top line. The company reported revenues of $283.9 million compared to estimates of $295 million.
Net revenue at the electronic brokerage unit of this company grew an impressive 24 percent from a year ago.
The market making business continues to be a major drag on earnings. Net Revenue plunged 26.2% for this segment.
DARTs were 463,000 during the quarter, which was 16% higher than the same quarter a year ago.
It continues to be a tale of two completely different companies at Interactive Brokers right now. The market making business is pulling down earnings on a quarterly basis. Low volatility continues to plague this business. On the other side, the electronic brokerage segment is experiencing a lot of growth. Pre-tax profit margin in the electronic brokerage segment was 58 percent in the second quarter, compared to just 53 percent last year. Total customer equity grew 31 percent in the past year to a current level of $37.4 billion.
The second quarter of 2013 certainly marked the best quarter for online brokerages in quite some time. TD Ameritrade and E*TRADE blew away analysts expectations in the quarter. It seems like brokers who are more closely tied to trading activity got more of a boost than those who weren’t. The rise in DARTs during the second quarter has to be encouraging for the industry as a whole, but the summer months are typically much slower so it will be interesting to see how these numbers look for the third quarter.
Shares of all four of these online brokers are essentially at their 52 week highs right now. While Interactive Brokers and Charles Schwab didn’t jump initially as the other two did, their shares have started climbing again recently with the uptick in the overall market.
Stay tuned as StockBrokers.com will have a look at third quarter earnings in the online brokerage industry in three months.