The online brokers have all reported first quarter earnings for 2016. Every quarter StockBrokers.com examines the earnings reports from all four publicly-traded online brokers. The Federal Reserve raised rates in December 2015, so these first quarter results give us a glimpse at whether that helped the brokers or not. We’ll take a look at fast facts and an overall viewpoint of each company’s report. We’ll finish by summing up what these reports mean for the online brokerage sector as a whole. Here is a look at the results from E*TRADE (ETFC), TD Ameritrade (AMTD), Charles Schwab (SCHW), and Interactive Brokers (IBKR).
Before taking a closer look at each report, let’s take a look at how the brokerages did on an earnings per share basis compared to the first quarter in 2015. E*TRADE reported 43 cents per share compared to only 29 cents in the year ago period. TD Ameritrade earnings rose to 38 cents per share from a level of 35 cents per share last year. Interactive Brokers brought in 51 cents per share in the quarter compared to a loss of 22 cents per share last year. Charles Schwab reported earnings of 29 cents per share compared to 22 cents per share in the first quarter last year.
E*TRADE First Quarter Earnings Fast Facts
E*TRADE bested analysts estimates on the bottom line by 10 cents per share
E*TRADE reported $472 million in revenue versus analysts estimates for $474.7 million
Daily Average Revenue Trades (DARTs) were 165,122 (down 3 percent from last year)
The company picked up 45,000 net new brokerage accounts in the quarter
E*TRADE’s results came in a little light on the top line, but overall Wall Street seemed very happy with these numbers. E*TRADE witnessed a large increase in new brokerage accounts, and they were able to reduce delinquencies. Expenses were lower almost across the board, and that certainly helped the bottom line results. Paul Idzik, CEO of E*TRADE, said in the conference call that he was very happy with the quarter. Idzik said capital deployment in the quarter was exceptional.
TD Ameritrade First Quarter Earnings Fast Facts
TD Ameritrade met analysts estimates of 38 cents per share in the quarter
Ameritrade reported $846 million in revenue, which was short of analysts estimates of $859.4 million
DARTs came in at 509,000 in the quarter. The activity rate was 7.6 percent which was a record for the company.
Net new client assets were up by $14 billion for a growth rate of 8 percent
Asset growth continues to be strong at TD Ameritrade in the first quarter. Ameritrade has put together several huge asset growth quarters in a row. The company reported $112 billion in interest rate-sensitive assets, which was a new record. Volatility in the stock market (especially early in the quarter) helped bring about the 7.6 percent activity rate. Operating expenses were down one percent in the quarter. TD Ameritrade shares slipped a bit after reporting these results since investors were concerned about the company missing top line estimates.
Charles Schwab First Quarter Earnings Fast Facts
Schwab met analysts estimates with 29 cents on the bottom line
Narrowly beat analysts estimates on the top line with $1,764 billion versus estimates of $1.754 billion
DARTs were 616,000 in the quarter, which was six percent higher than the same quarter last year
Pre-tax profit margin jumped to 37.1 percent from 31.7 percent a year ago
Charles Schwab reported strong net income growth of 32 percent from the same quarter in 2015. DARTs were particularly strong for the online broker in this first quarter. Schwab reported that assets in Schwab ETF OneSource reached $52.3 billion in the quarter. Assets have grown at a 50% compound annual growth rate since the inception of that program. Schwab CFO Joe Martinetto commented on the earnings call that the Federal Reserve raising rates definitely boosted the earnings growth for the broker. Asset management and administration fees rose 9 percent from last year, boosted by higher short-term rates. Schwab ended the first quarter with 9.9 million active brokerage accounts.
Interactive Brokers First Quarter Earnings Fast Facts
Easily beat analysts estimates of 45 cents by reporting 51 cents per share
Total DARTs jumped by 15 percent from last year to 749,000
Electronic Brokerage segment reported a pre-tax profit margin of 68%, up from 18% a year ago
Customer accounts increased 17 percent from last year to 345,000
Interactive Brokers delivered a strong start to 2016. DARTs were a big earnings driver for this broker. The pre-tax profit margin jumping from 18 percent to 68 percent was crucial as well. The results from the quarter included a $123 million gain on their currency diversification strategy due to the weakening of the US dollar against other currencies. Commissions and execution fees profits jumped by 11 percent from last year. Net interest income rose 37 percent from the first quarter of 2015. The market making segment earned $20 million in the quarter, but it was the electronic brokerage that had strong earnings growth.
On the whole, DARTs were strong in the first quarter, largely due to the exceptionally volatile January. Interactive Brokers was the biggest beneficiary of that volatility. As we have said for several quarters in a row, the online brokers continue to do a nice job with asset growth. Additionally, expenses have decreased at most brokers, and that has helped with bottom line growth in recent quarters. There were definitely signs of the interest rate increase helping some of these brokers, and potential further increases would definitely be a positive for future earnings. Volatility has decreased in recent weeks, and we’ll be watching that for future signs as well. StockBrokers.com will be back with a report on earnings for the second quarter of 2016 in three months.
Below is a yearly chart of all four of the online brokers. The charts are through the end of the trading day on April 25.