Another earnings season is over for the online brokers. All of the 2018 first quarter reports have been released. Each quarter StockBrokers.com takes an in-depth look at the earnings reports from each of the publicly-traded brokers. We’ll look at each broker by starting with fast facts from the report. We will then take a deeper dive into each report. At the end of this post, we’ll summarize what these results mean for the online brokerage sector as a whole. Here is a look at the results from Charles Schwab (SCHW), E*TRADE (ETFC), TD Ameritrade (AMTD), and Interactive Brokers (IBKR).

Before we get into each individual report, let’s take a look at how each company did on an earnings per share basis compared to the same quarter one year ago. Charles Schwab reported earnings of 55 cents per share, compared to only 39 cents per share last year. E*TRADE brought in 80 cents per share in the first quarter. That was much higher than their 49 cents per share profit from a year ago. Adjusted earnings at TD Ameritrade came in at 73 cents per share versus 40 cents per share last year. Interactive Brokers posted earnings of 63 cents per share, which was much higher than their 34 cents per share in earnings a year ago.

Charles Schwab First Quarter Earnings Fast Facts

Beat analysts estimates by a penny on the bottom line

New brokerage accounts were 443,000- the highest level in 18 years 

Net interest revenues jumped from $1.00 billion a year ago to $1.263 billion this year

Total non-interest expenses rose 13 percent year over year

Charles Schwab beat analysts estimates on both the top and bottom line. Very interestingly, trading revenue was up five percent from a year ago. Why is that so important? The slashing of trading fees in the online brokerage industry occurred in February of last year. Record trading activity in the first quarter this year more than made up for the lower commissions. Schwab posted a 41.8 percent pre-tax profit margin in the quarter. Schwab saw its highest level of net new assets since 2008 in the first quarter. Schwab reported nearly 20 percent more calls to their advisors in the first quarter of this year compared to last year. This growth was thanks to the “Through Clients’ Eyes” push from the company, as well as investor nervousness due to the volatility in the market. In the first quarter, Schwab reached $130 million in assets in the Schwab ETF OneSource program that was launched five years ago. A very solid quarter from Schwab.

E*TRADE First Quarter Earnings Fast Facts

Earned 80 cents per share versus estimates of 79 cents per share

Total Daily Average Revenue Trades (DARTs) increased a whopping 26 percent from a year ago

Net new brokerage assets were $5.3 billion, a new company record

Net interest margin of 297 basis points

E*TRADE beat by a penny on the bottom line, and they easily bested analysts estimates on the top line as well. Analysts expected them to report $690 million in revenues, but they delivered $708 million. Revenue from commissions moved up from $127 million to $137 million because of the extremely strong DARTs numbers. This is another example of the commissions price being slashed at an online broker without it hurting very much, at least so far. Also important to note is how strong derivative DARTs were in the quarter. Derivative DARTs jumped an impressive 65 percent from last year. Non-interest expenses were $152 million compared to $136 million a year ago. E*TRADE reported an operating margin of 47 percent, which is up six percent from one year ago. Gross new brokerage accounts were up 17 percent from last year. It was another very good quarter for E*TRADE.

TD Ameritrade First Quarter Earnings Fast Facts

Missed analysts estimates by a penny on the bottom line

Net new assets were $22.2 billion in the quarter

Average yield paid on deposits of 1.29 percent, up 16 basis points from a year ago

Record daily average trades of 943,000 in the quarter, up 82 percent year over year

Though TD Ameritrade did miss narrowly on the bottom line, they beat on the revenue number. TD Ameritrade reported $1.42 billion in revenue compared to estimates of $1.38 billion. DARTs were an area of great strength coming in at 943,000. Those numbers were helped by the acquisition of Scottrade. TD Ameritrade saw expenses rise quite a bit in the quarter, and that was at least partially due to the acquisition of Scottrade. TD Ameritrade’s operating margin of 28 percent was up from 27.4 percent a year ago. Net new assets brought in during the quarter rose eight percent from last year. Net profit margin dipped from 21.3 percent to 19.2 percent this year. Client assets reached $1.2 trillion, up 40 percent from last year. Though the bottom line missed narrowly, TD Ameritrade continues to show impressive growth.

Interactive Brokers First Quarter Earnings Fast Facts

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

Revenues jumped 40.9 percent year over year to $527 million

Pretax profit margin of 65 percent, up from 57 percent a year ago

Total DARTs jumped by 43 percent from last year to 939,000

Interactive Brokers blew away estimates in the first quarter. Earnings per share came in seven cents ahead of estimates. Analysts expected revenue of $477.5 million, so Interactive Brokers beat on the top line by nearly $50 million in the first quarter. At the electronic brokerage business, revenues were up 48.1 percent from last year. Market making segment income was $9 million in the quarter, compared to a loss of $22 million in the year ago quarter. Interactive Brokers reported that their currency diversification strategy increased comprehensive earnings by $46 million in the first quarter. In the brokerage segment, commissions revenue jumped 43 percent from a year ago thanks to large jumps in futures and options trading. Futures trades per day were up 53 percent from last year and options were up 48 percent from a year ago. Another very good quarter for Interactive Brokers.

Conclusion

I don’t think you can describe this quarter as anything other than tremendous for the online brokers. There were many questions about the slashing of commissions last year, and in the first quarter the brokers reported great earnings despite the lower commissions fees than last year. It certainly helped that volatility rose in the overall market, but these online brokers have done a great job diversifying their profit sources. Asset growth continues to be strong at all of the online brokerages. As interest rates rise, it should continue to help the brokers as well. Rates should continue to rise in the coming quarters.

The fourth quarter of last year was very strong, and this quarter was arguably even stronger. It’s been a great run of late for the online brokers. StockBrokers.com will keep a close eye on them in the coming quarters to see if these trends continue.

Below is a yearly chart of all four brokers. The charts are as of the close of trading on April 26.