All four of the publicly-traded online brokers have released their earnings reports from the first quarter of 2019. Every quarter StockBrokers.com takes a detailed look at the earnings reports from these brokers. We begin by looking at some fast facts from each report. We then take a deeper dive into the individual reports. At the end of the post, we’ll examine what these results mean for the online brokerage sector as a whole. Here is a look at the results from Charles Schwab (SCHW), TD Ameritrade (AMTD), Interactive Brokers (IBKR), and E*TRADE (ETFC).

Before we get into the individual reports, let’s take a look at how each company did on an earnings per share basis compared to a year ago. Charles Schwab reported 69 cents per share in the first quarter, which is up from 55 cents in the same quarter a year ago. TD Ameritrade delivered earnings per share of 93 cents compared to 73 cents last year. Interactive Brokers earned 64 cents per share this year, while they earned 63 cents a year ago. E*TRADE earned $1.09 per share in the first quarter compared to 88 cents per share a year ago.

Charles Schwab First Quarter Earnings Fast Facts

Earnings of 69 cents per share beat analysts expectations by 3 cents per share

Revenue came in at $2.72 billion while analysts expected only $2.68 billion

Pre-tax profit margin jumped to 46.4 percent compared to 41.8 percent a year ago

Client assets held in ETF’s reached $180.9 billion as of the end of the quarter

Schwab beat analysts estimates on both the top and bottom line. The company reported a 14 percent rise in revenues and a 23 percent rise in net income. The net income figure of $964 million in the first quarter was a new record for Schwab. Asset management and administration fees were down 11 percent in the quarter. Trading revenue came in at $185 million, down eight percent from a year ago. Schwab’s average revenue per trade was $7.19 in the first quarter compared to $7.24 a year ago. Total client assets were up eight percent to $3.59 trillion. Schwab continues to see increasing interest in their ETF offerings. Additionally, client assets in their digital advisory solutions program jumped by 23 percent in the past year.

TD Ameritrade First Quarter Earnings Fast Facts

TD Ameritrade beat analysts estimates on the bottom line by a penny

DARTs declined by 8.8 percent to 860,000 in the quarter

Revenues came in at $1.45 billion while analysts estimated $1.46 billion

Commissions and transaction fees slipped 12.4 percent from a year ago

TD Ameritrade beat analysts estimates on the bottom line by a penny and very narrowly missed on the top line. Ameritade’s revenues were up two percent from a year ago. Net new client assets were $20 billion, an annualized growth rate of seven percent. TD Ameritrade CEO Tim Hockey said the company cut marketing in the first quarter because “fish weren’t bitting.” Hockey also noted that 70 percent of TD Ameritrade’s marketing is digital. Hockey also mentioned that lower rates and relatively lower volume hurt the company. Total asset based revenues were $929 million in the quarter compared to only $830 million a year ago.

Interactive Brokers First Quarter Earnings Fast Facts

Beat analysts estimates by 21 cents per share on the bottom line 

Revenue came in at $558 million, up 5.9 percent from a year ago

Total DARTs decreased by 10 percent to 848,000

Customer equity was up by 14 percent

Interactive Brokers blew away analysts estimates in the first quarter. They bested expectations on the bottom line by 21 cents per share. Analysts expected only $464 million in revenues, but they delivered $558 million. After a somewhat disappointing fourth quarter report, Interactive Brokers delivered a very good report this time around. As was the case across the board in the sector, trading activity dipped for the broker. Net interest income was up by 13 percent from a year ago. Revenues at the electronic brokerage segment actually dipped 0.2 percent in the quarter. Interactive Brokers reported a solid 21 percent increase in customer accounts to 623,000.

E*TRADE First Quarter Earnings Fast Facts

Reported record net revenue of $755 million

Total customer assets are up 22 percent from last year

DARTs dropped seven percent from a year ago

Record adjusted operating margin of 50 percent

E*TRADE blew away analysts estimates in the first quarter. Analysts expected only $737 million in revenues, but E*TRADE reported $755 million. E*TRADE’s bottom line number of $1.09 did include a one-time benefit of 8 cents per share, but even with that taken out E*TRADE easily surpassed analysts estimates of 93 cents per share. Net interest margin rose by 26 basis points from a year ago. Total non-interest expenses dropped 5.1 percent as E*TRADE reduced advertising costs in the quarter. Total customer accounts are up 29 percent from last year. For the first quarter, 32 percent of DARTs were derivatives.

Conclusion

The first quarter of 2019 was a mixed bag from the online brokers. While 2018 was a very good year for the brokers, there were certainly some question marks going into this year. We mentioned the lower volatility in early 2019 in our last review, and that lower volatility clearly hurt earnings in this quarter. DARTs were down across the board, and commissions are clearly lower than they were a few years ago. The brokers have done a great job diversifying their businesses. They are less dependent on trades than they were a few years ago, though it would certainly be helpful to this sector in general if the volume would pick up a bit in the marketplace. Volatility has stayed low into the second quarter thus far. Additionally, it appears we may be at or near the peak of the rate hiking cycle from the Federal Reserve. There are headwinds for this sector, but these companies are in a good place financially. We’ll track how things go the rest of the year.

Below is a yearly chart of all four publicly-traded online brokers. The charts are as of the close of trading on April 25.