We are almost done with a turbulent first month of 2016, but we need to take a look back at how the online brokers reported in the fourth quarter of 2015. Earnings season is now complete for this sector. Each quarter StockBrokers.com examines the earnings reports from all four publicly-traded online brokers. We’ll take a look at some fast facts from each company’s report, then we’ll sum up what these reports mean for the online brokerage sector as a whole. Here’s a look at the results from TD Ameritrade (AMTD), E*TRADE (ETFC), Charles Schwab (SCHW), and Interactive Brokers (IBKR).
Before we dive deeper into each report, let’s take a look at how these brokerages did on an earnings per share basis compared to the same quarter last year. TD Ameritrade earned 39 cents per share, which was in line with last year. E*TRADE reported earnings that rose from 26 cents a year ago to 30 cents per share in the fourth quarter this time around. Charles Schwab reported 28 cents per share compared to 25 cents last year. Interactive Brokers earned 25 cents per share compared to only 12 cents per share last year in the fourth quarter.
TD Ameritrade Fourth Quarter Earnings Fast Facts
TD Ameritrade bested analysts estimates by three cents per share in the quarter
Revenue came in at $812 million, which was in-line with estimates
Ameritrade saw record investment product fee revenue of $92 million
Daily Average Revenue Trades (DARTs) came in at 438,000 in the quarter
It might not have wowed on the top line, but this was another solid quarter from TD Ameritrade. DARTs were lighter than normal in the fourth quarter because of the quiet stock market during that period. January has been a different story though, and I would expect those DART numbers for the month of January to be impressive. TD Ameritrade continued its strong growth when it comes to new client assets. Ameritrade brought in about $17 billion, for an annualized growth rate of 10 percent. Pre-tax income was 41 percent of revenues in this quarter.
E*TRADE Fourth Quarter Earnings Fast Facts
Analysts expected 29 cents per share and the company delivered 30 cents per share
Revenue was down just a tick ($454 million vs. $461 million), but it did beat analysts estimates
DARTs were 147,000. That is down 6 percent from last quarter and 13 percent from a year ago.
E*TRADE added 13,000 new brokerage accounts in the quarter
E*TRADE reported they repurchased 1.7 million shares at an average price of $30.10 during the fourth quarter. The online broker was certainly hurt by a slowdown in DARTs, as was the industry as a whole. E*TRADE reported that for the full year in 2015, they added 96,000 brokerage accounts. Average commission per trade dipped to $10.66 this quarter compared to $10.87 in the last quarter. This figure has fluctuated quite a bit in recent quarters. E*TRADE reported that it now has total customer assets of $45.4 billion. There was a movement of $3.7 billion onto the company’s balance sheet that had previously been held at third party institutions.
Charles Schwab Fourth Quarter Earnings Fast Facts
Schwab reported 28 cents per share, which was 3 cents per share better than the average analysts estimate
Revenues rose by nine percent to $1.69 billion in the quarter, and this topped analysts estimates of $1.62 billion
Schwab reported record quarterly net income of $416 million
New brokerage retail accounts were 151,000 in the fourth quarter
Schwab CEO Walt Bettinger said in the earnings release that the “through clients’ eyes” strategy remains the key driver of growth at Schwab. Pre-tax profit margin jumped to 38.1 percent in the quarter. That is a significant bump up from the 35.7 percent in the same quarter last year. Total client assets at year end were $2.51 trillion, up two percent from a year ago. Over 155,000 accounts enrolled in a retail advisory solution offering for the year as a whole, which is up 60 percent from from 2014. DARTs came in at 285,000, which is down ten percent from the same period a year ago.
Interactive Brokers Fourth Quarter Earnings Fast Facts
Earnings jumped to 25 cents from 12 cents a year ago, but analysts had expected 26 cents per share
Net Revenue was $271 million and analysts expected a much higher number of $327.7 million in revenue
Pre-tax income fell 32 percent in the electronic brokerage segment
DARTs came in strong at 582,000, which was actually up 3 percent from last year
Pre-tax profit margin here was 47 percent compared to 36 percent in the fourth quarter in 2014. Gross margins widened in this quarter to slightly better than 81 percent. Interactive Brokers did report that pre-tax profits nearly doubled to $27 million in the market making segment of the company. While the market making segment has still been relatively weak, it is stronger than it was for a significant amount of time. I’m interested to see what that division can do with a more volatile period like we are in right now in the first quarter of 2016. The net revenue drop of 19 percent in the electronic brokerage segment at Interactive Brokers as well as their revenue miss led to the stock being punished following this earnings release.
The fourth quarter wasn’t a banner quarter for the industry, but it also wasn’t necessarily a bad one either. Macro factors led to DARTs being down at most online brokers. If the volatility stays high as it has so far in 2016, that will change when these companies report next time around. Most brokers continue to do a good job bringing in new client assets. Margins have improved at most of these brokers as well, which is a sign that management has been doing a solid job. Let’s see which brokers benefit most from the spike in volatility! StockBrokers.com will continue to monitor the earnings of these online brokers, and we’ll be back with a report on the first quarter of 2016 in three months.
Below is a yearly chart of all four of the online brokers. These charts are through the end of the trading day on January 26.