continues to monitor the publicly-traded online brokers quarterly earnings reports. 2012 was a very difficult year for the industry as a whole, but things have begun to take a turn for the better as 2013 has moved along. The public is slowly starting to get back into the market, and that is making a difference for the online brokers. The second quarter was the best quarter in quite a while for many online brokers. Were the same online brokers able to keep that momentum going into the third quarter? We’ll take a look at some fast facts from each company’s quarterly results, and then examine what it means for the industry overall. Here’s a look at results from Charles Schwab (SCHW), Interactive Brokers (IBKR), E*TRADE (ETFC), and TD Ameritrade (AMTD).

First, let’s look at how each broker did this year versus the same quarter a year ago. Charles Schwab earned 22 cents per share in the quarter versus 19 cents per share last year. Interactive Brokers’ bottom line jumped to 32 cents per share in the third quarter compared to just 26 cents per share last year. E*TRADE reported earnings of 16 cents per share versus a loss of 10 cents per share last year. TD Ameritrade reported earnings of 36 cents per share, which was a significant increase from their profit of 26 cents per share in the same quarter last year.

Charles Schwab 2013 3rd Quarter Earnings Fast Facts:

Schwab delivered $1.37 billion in revenue during the quarter, which was their best top line amount since the height of the Internet bubble

DARTs were up 8 percent from last year, but they were down 6 percent from the second quarter

Charles Schwab now has more than $2 trillion in assets

Fees rose 11 percent from last year in the asset management business 

Charles Schwab’s quarter can’t be seen as anything other than as very good news. The fact that the company was able to report the most in revenue since the height of the Internet bubble speaks to how well they generated revenue in the quarter. Asset management fees continue to rise largely due to low interest rates. Schwab beat analysts estimates solidly on both the bottom line and top line in the quarter. The stock market responded very positively to this report as SCHW shares jumped five percent the day after they reported their results.

Interactive Brokers 2013 3rd Quarter Earnings Fast Facts:

Interactive Brokers reported that customer equity grew 31 percent in the past year

Total DARTs jumped 21 percent over the same quarter last year

Pretax profit margin in the electronic brokerage segment was 56 percent compared to just 48 percent last year

Market Making segment saw income before taxes edge down from $90 million last year to $88 million this year

Interactive Brokers operates in two major divisions: the electronic brokerage segment and the market making segment. The electronic brokerage segment has been performing very well all year, and that continued in this quarter. The market making segment continues to struggle because of low market volatility. It is important to note though that the market making segments numbers are better than they were in the first and second quarters of this year. Interactive Brokers matched analysts estimates on the bottom line and beat top line estimates by 1.7 percent.

E*TRADE 2013 3rd Quarter Earnings Fast Facts:

Total DARTs were 145,150 in the quarter. This was 3 percent lower than the second quarter, but 13 percent higher than the same quarter last year

Revenue came in at $417, which missed analysts estimates of $419.9 million

E*TRADE announced the sale of its market making segment for $75 million

Non-interest income dropped from $229.2 million last year to $176 million this year

E*TRADE is benefiting from the rise in DARTs, but the company’s soft revenue numbers spooked the market a bit. Investors sold off shares of ETFC right after the earnings report. The sale of the market making segment was cheered by many analysts, since that unit has been holding the company back in the past couple years. The average commission per trade was $11.15 in the third quarter. That same number was $11.10 in the second quarter. E*TRADE now has almost 4.6 million customer accounts.

TD Ameritrade 2013 3rd Quarter Earnings Fast Facts:

TD Ameritrade reported total client assets worth $555.9 billion as of the end of the third quarter. This number is up 18 percent from a year ago.

TD Ameritrade missed analysts estimates on the top line. Revenues came in at $709 million versus estimates of $718 million. 

DARTs were 382,000 in the third quarter, which is a 16 percent gain year over year 

Net Interest margin at the company was just 1.41 percent compared to 1.66 percent in the previous quarter

TD Ameritrade operating income rose 20 percent from last year. The 36 cents per share on the bottom line beat analysts estimates, but the company did come up short on the top line. Some analysts pointed to the net interest margin drop as a concern for the company, so that will be something to keep an eye on in the future. The company said it expected to earn between $1.20 and $1.40 per share in the fiscal year 2014. TD Ameritrade announced a special dividend of 50 cents per share as well as a quarterly dividend increase to 12 cents per share.’


While it was E*TRADE and TD Ameritrade that blew away estimates in the second quarter, Charles Schwab reported earnings that beat expectations across the board in the third quarter. Interactive Brokers electronic brokerage segment continues to perform extremely well. Online brokers earnings moving forward are going to be decided largely by market participation. TD Ameritrade put out a little extra tidbit saying that between October 1 and October 28 DARTs for the company were at 419,000. That is a small sample size, but if that trend continues it would be great news for the industry as a whole. Overall, the third quarter earnings reports from the brokers were relatively strong.

Shares of all of these stocks are trading less than $1 per share away from their 52-week highs. Stay tuned as will have a look at fourth quarter earnings in the online brokerage industry in another three months.