It’s time for the first Online Brokers Earnings Review of 2015. StockBrokers.com examines the quarterly reports from all four of the publicly-traded online brokers each quarter. The online brokers had a very good year in 2014. Was 2015 able to start off the same way? 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 overall sector. Here’s a look at results from Charles Schwab (SCHW), Interactive Brokers (IBKR), TD Ameritrade (AMTD), and E*TRADE (ETFC).
Prior to taking a more in-depth look, let’s take a quick look at how each broker did compared to the same quarter last year. Schwab’s earnings fell 8.3 percent to 22 cents per share. Interactive Brokers reported a loss of 22 cents per share compared to a profit of 34 cents per share last year (more on the reason for this below). TD Ameritrade earned 35 cents per share, which was the same as their first quarter last year. E*TRADE earned 29 cents per share in the first quarter (excluding a one-time charge), which was 12 percent lower than last year’s figure.
Charles Schwab First Quarter Earnings Fast Facts:
Earnings per share missed analysts estimates by two cents
Revenue dropped by 3.2 percent from a year ago
Daily Average Revenue Trades (DARTs) were down seven percent from last year
$34.2 billion in net new assets were brought in
Expenses were up at Schwab in the first quarter. The broker reported $1.04 billion in expenses in the quarter vs. $960 million in the same quarter last year. Compensation expenses rose, and Schwab had higher marketing expenses largely due to the big rollout of Schwab Intelligent Portfolio, which StockBrokers.com recently blogged about. Schwab’s results were disappointing due to the higher costs and lower trading activity, but the company continued to show big positive momentum when it comes to asset gathering. Net new assets from retail investors were the highest since 2008. Total client assets are now $2.52 trillion at Schwab. Schwab ETF OneSource is a continued area of strength, where balances are now $47.1 billion in total, a large 65 percent jump from last year.
Interactive Brokers First Quarter Earnings Fast Facts:
Reported loss of 22 cents per share compared to analysts estimates of a loss of 7 cents
A $121 million loss due to the sudden move in the Swiss franc hit the broker hard
DARTs actually increased by 11 percent from a year ago
Declared a 10 cent per share quarterly dividend
StockBrokers.com covered the Swiss franc move a few months ago, and we knew a hit was coming for Interactive Brokers, and this was certainly a big hit. Additionally, Interactive Brokers took a $197 million loss on the company’s currency diversification strategy occurred because of the strengthening of the U.S. dollar against other currencies. The market making segment continued to be a drag on Interactive Brokers. Low volatility has made things very tough for that business. The DARTs number was much stronger here than at the other online brokers in the first quarter.
TD Ameritrade First Quarter Earnings Fast Facts:
Revenue dropped 1.1 percent from a year ago to a level of $803 million
DARTs were down 3.1 percent from last year
Net new client assets of $16.3 billion for an annualized growth rate of 10 percent
Average commission price dipped to $12.02 from $12.47 a year ago
TD Ameritrade reported the same 35 cents per share number it did a year ago, but revenues were down slightly. TD Ameritrade met analysts expectations on the bottom line, but the top line was a miss. The average commission price dropping so much was a surprise, and that along with the trading activity slowing down was a big part of why the results were seen as a slight disappointment. The biggest reason AMTD shares fell after this report was the company’s forward looking forecast. The company guided toward the low end of estimates for 2015 fiscal profits ($1.45 to $1.70 per share).
E*TRADE First Quarter Earnings Fast Facts:
Reported 29 cents per share excluding a one-time debt retirement charge
Analysts were only expecting 24 cents per share
Net new brokerage accounts were 39,000 and the annualized attrition rate was 8.8 percent
DARTs dropped 14 percent from a year ago and a one percent increase from the fourth quarter
E*TRADE continues to make it a high priority to lower their debt burden. CEO Paul Idzik stated on the earnings call that the goal is to reduce corporate debt to a level of $1 billion. Total customer assets for E*TRADE at the end of the quarter was $299 billion compared to $269 billion a year ago. The DARTs number was a disappointing one since trading activity dipped more here than it did for the other online brokers. Overall, it was a positive report for a company that has made some significant progress from a couple years ago when their balance sheet wasn’t healthy at all.
There’s no doubt that the first quarter was a weaker one for the online broker sector than the fourth quarter of 2014 was. That isn’t a huge surprise though since business was so strong at the end of last year. There are two factors really hurting brokers right now: the lack of volatility and extremely low interest rates. All of the brokers continued to do a nice job bringing in assets in the quarter. StockBrokers.com will continue to closely monitor these companies as we go through the second quarter. Of particular interest will be the DARTs that each broker reports. We’ll be back in three months with a review of the second quarter!
Below is a yearly chart of all four of the online brokers.