Every quarter StockBrokers.com examines the quarterly earnings reports from the four publicly-traded online brokers. The fourth quarter earnings season is complete, so we’ll take a look back at how the brokers ended last year. Volume typically bumps up in the fourth quarter as traders are back at work on a consistent basis. Were the online brokers able to take advantage of this? We’ll take a look at some fast facts from each broker’s results, and then we’ll try to figure out what it means for the sector overall. Here’s a look at results from Charles Schwab (SCHW), Interactive Brokers (IBKR), E*TRADE (ETFC), and TD Ameritrade (AMTD).
Before we dive deeper, let’s take a brief look at how each broker did compared to last year. Schwab reported a quarterly profit of $350 million compared to $319 million last year. Interactive Brokers reported 12 cents per share on the bottom line compared to just 7 cents last year. E*TRADE reported 26 cents per share on the bottom line compared to 20 cents in the fourth quarter of 2013. TD Ameritrade earned $211 million compared to $192 million a year ago.
Charles Schwab Fourth Quarter Earnings Fast Facts:
Pre-tax profit margin came in at 35.7 percent
Trades generating fees in advisory accounts surged by 27 percent to $63 million
Expenses rose by six percent to $997 million
New retail brokerage accounts were 146,000
Charles Schwab narrowly beat analysts estimates on both the top line and the bottom line. Trading revenue from commissions and bond markups grew by six percent during the quarter. Interest revenue came in far above expectations at $584 million. For the full year 2014, Schwab reported an increase of $214 billion in total client assets. The company reported record net income of $1.3 billion in the fiscal year 2014. That represents 23 percent earnings growth for the company. Schwab’s CEO did note on the conference call that the company is unlikely to be able to keep profit margins at such a high level, since they plan to invest in more projects and services moving forward.
Interactive Brokers Fourth Quarter Earnings Fast Facts:
The bottom line profit of 12 cents per share doubled analysts estimates of 6 cents
Revenue fell by 17 percent to $208.1 million
Pre-tax profit margin was 64 percent in the electronic brokerage segment of the company
Non-interest expenses dropped 37 percent year over year
It was an interesting quarter for Interactive Brokers. The company beat by a large amount on the bottom line, but top line revenue numbers came in far weaker than analysts estimates. The bottom line number beat almost solely because of the massive drop in non-interest expenses year over year. The market making segment of the company continues to be a drag on earnings, while the electronic brokerage segment continues to be strong. Daily Average Revenue Trades (DARTs) jumped 25 percent compared to a year ago. Keep an eye on Interactive Brokers earnings in the next couple quarters, because this is company that will be hurt by the Swiss Franc move from January 2015.
E*TRADE Fourth Quarter Earnings Fast Facts:
Earned 26 cents per share excluding $59 million pre-tax loss related to early estinguishment of debt
Net new brokerage accounts were 17,000
DARTs increased five percent year over year and ten percent from the third quarter
Revenue came in at $461 million compared to estimates of $444 million
E*TRADE beat analysts estimates on both the top and bottom lines. The company continued to pay down its debt and improve its balance sheet. Provision for loan losses came in at $10 million in the quarter. The annualized attrition rate came in at 9.1 percent in the fourth quarter. For the full year 2014, E*TRADE reported a record $10.9 billion in net new brokerage assets. DARTs for the full year were 168,000 compared to 151,000 a year ago. E*TRADE reported $290 billion in total customer assets as of the end of the fourth quarter.
TD Ameritrade Fourth Quarter Earnings Fast Facts:
Net revenue of $819 million in the quarter was a new quarterly record for the company
Earnings narrowly missed analysts estimates on both the top and bottom lines
DARTs were up 11 percent from a year ago to 457,000
Net new client assets were $18.8 billion
TD Ameritrade earned 39 cents per share compared to analysts estimates of 40 cents per share. The company reported revenues of $819 million compared to estimates of $831 million. Activity rate at TD Ameritrade was 7.2 percent in the fourth quarter. Client assets stood at $672 billion at the end of the fourth quarter. Pre-tax income was $334 million, or 41 percent of net revenues. Of the $819 million in net revenue, 55 percent of that was asset based. Investment product fee revenues were up 15 percent year over year. Net interest margin dropped from 1.55 percent to 1.53 percent in the quarter.
The fourth quarter was a strong one overall for the online brokers, though a couple of the companies did miss expectations. Volatility crept up a bit in the fourth quarter, which contributed to higher year over year DARTs. All of these brokers continue to do a great job bringing in new accounts and new client assets. The balance sheets at these companies continue to look far healthier than they did a year or two ago. 2014 was definitely a good year for the sector overall. What will 2015 bring? StockBrokers.com will be closely monitoring the earnings numbers as we move forward. Stay tuned!
Below is a yearly chart of all four of the online brokers.