The third quarter earnings season is now complete for the online brokers, so it’s time for our quarterly earnings review. Every quarter StockBrokers.com examines the earnings reports from all four of the publicly-traded online brokers. First, we look at fast facts from each broker’s results, then at the end of the post we try to summarize what these reports mean for the online brokerage industry as a whole. Here’s a look at the results from Charles Schwab (SCHW), TD Ameritrade (AMTD), Interactive Brokers (IBKR), and E*TRADE (ETFC).
Before we go in-depth, let’s have a look at how these brokerages did this quarter compared to the same quarter a year ago. Schwab’s earnings rose from 24 cents to 27 cents per share this year when excluding non-recurring items. Interactive Brokers reported 23 cents per share, which was far better than last year’s loss of 13 cents per share. E*TRADE’s third quarter bottom line was 33 cents excluding one-time charges. A year ago E*TRADE earned 29 cents per share. TD Ameritrade earnings came in at 40 cents per share compared to 38 cents last year.
Charles Schwab Third Quarter Earnings Fast Facts
Net income of $376 million was 17 percent higher than last year
Daily Average Revenue Trades (DARTs) were 13 percent higher than last year
Total client assets sit at $2.4 trillion, up one percent from a year ago
Pretax profit margin soared to 36.5%, highest since 2008
Schwab’s earnings were a little bit better than analysts had been expecting. The company certainly got a boost from the extra volatility in late August. Schwab said that during the week of August 24, DARTs were a stunning 514,260. Clients opened 254,000 new brokerage accounts, which was a solid 11% increase year-over-year. Also important to note was the strength of Schwab’s advice offerings. The market volatility meant that investors were signing up for retail advisory solutions at a much faster pace than in the past. In the quarter, 36,000 accounts enrolled in one of the company’s retail advisory solutions. That 36,000 figure is 57% more than the same period a year ago.
Interactive Brokers Third Quarter Earnings Fast Facts
Revenues jumped from $171 million last year to $359 million this year
Market making segment reported $90 million in revenue, up 84 percent from last year
Currency movements decreased comprehensive earnings by $76 million in the quarter
DARTs jumped a whopping 28 percent from a year ago
Interactive Brokers turned in a strong quarter. Market volatility really benefited this company a great deal. The market making segment had been floundering for a long time, but it thrived in the third quarter. Pretax profit margin in that segment went from 14 percent last year to 51 percent this year. DARTs jumped more at Interactive Brokers than they did at any of the other online brokers. The 28 percent increase from last year is impressive, as is their reports of an 11 percent increase from the second quarter. It should be noted that non-interest expenses jumped 20 percent from a year ago to $157 million, which certainly cut into profits in the quarter.
E*TRADE Third Quarter Earnings Fast Facts
With One-time charges related to termination of wholesale funding obligations the company lost 53 cents per share
DARTs grew by two percent from a year ago and four percent from the second quarter
Company announced President Navtej S. Nandra will depart at the end of the year. E*TRADE doesn’t intend to replace the position.
Net new accounts were 19,000 in the quarter which was down from 24,000 in the same quarter a year ago
E*TRADE actually beat analysts estimates by four cents per share in the quarter. Revenue at E*TRADE rose from $440 million last year to $443 million this year. The bottom line was able to improve partially because the company did a good job keeping expenses under control. E*TRADE reported that expenses decreased $16 million from last quarter, and were up $16 million from the third quarter of 2014. E*TRADE said that they had a day in August where customers made a record 394,000 trades in a single day. E*TRADE ended the third quarter with $277 billion in total customer assets.
TD Ameritrade Third Quarter Earnings Fast Facts
Revenue increased from $795 million last year to $831 million
DARTs jumped by 19 percent in the quarter to 478,776
Expenses rose only three percent from a year ago
TD Ameritrade narrowly missed analysts revenue estimates, but matched estimates on the bottom line
TD Ameritrade reported net new client assets of $16 billion, an annualized growth rate of nine percent. The $831 million in revenue was a new record for the company. TD Ameritrade had an activity rate of 7.3 percent in the quarter. Return on shareholders equity came in at 17 percent in the quarter. Investment product fee revenue dropped by one percent from last year. The company also released its Fiscal Outlook for 2016. TD Ameritrade expects to earn between $1.45 and $1.75 per share in 2016. The average analyst estimate is $1.67.
It was a good third quarter for the online brokers. The third quarter is typically the quietest quarter of the year in terms of volume, but extreme volatility in late August was great for earnings in this industry. Clients traded at record paces in the month of August. TD Ameritrade and Interactive Brokers benefited the most from the increased volatility, but all of the brokers saw a boost to their bottom line. Volatility has dipped so far in the fourth quarter, so it will be interesting to see how the year-over-year comps look for the fourth quarter DARTs. StockBrokers.com will be back in three months with a full review of the final quarter of 2015!
Below is a yearly chart of all four of the online brokers. These charts are through the end of the trading day on October 28.