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

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 the same quarter last year. E*TRADE reported 95 cents per share compared to only 70 cents per share a year ago. Interactive Brokers earned 58 cents per share this year compared to only 32 cents per share in the same quarter a year ago. TD Ameritrade’s earnings jumped from 44 cents per share a year ago to an adjusted number of 89 cents per share this year. Charles Schwab earned 60 cents per share compared to just 39 cents per share a year ago.

E*TRADE Second Quarter Earnings Fast Facts

Analysts were expecting only 89 cents per share, so E*TRADE’s 95 cents per share was a solid earnings beat

Revenues came in at $710 million versus estimates of $705 million

Total DARTs increased by 24 percent to 259,000

Net interest income was up 27.2 percent from last year

E*TRADE solidly beat analysts expectations across the board in the second quarter. DARTs rising by 24 percent helped a great deal as traders stayed more active than normal during what can be a slow period on Wall Street. Net interest income rose 27.2 percent thanks in large part to higher interest income. Operating margin was 49 percent and adjusted operating margin came in at 46 percent in the quarter. This was the seventh straight quarter that E*TRADE’s adjusted operating margin rose. Total non-interest expenses did rise 7 percent to $384 million. Total customer assets were $440.78 billion, which is 27 percent higher than a year ago. E*TRADE continued to improve their balance sheet in the quarter. Allowance for loan losses tanked 53.4 percent from last year to just $54 million.

Interactive Brokers Second Quarter Earnings Fast Facts

Total DARTs increased 19 percent from a year ago to 797,000.

Analysts expected 51 cents per share, so the 58 cents per share reported was a large beat

Customer accounts were up 27 percent to a record of 542,000 accounts.

Total net revenues increased 15 percent to $445 million.

Interactive Brokers beat expectations on both the top and bottom line in the second quarter. Net revenues in the electronic brokerage segment jumped 32.6 percent to $43 million. Pre-tax income rose 42.9 percent to $283 million. Pre-tax profit margin in the electronic brokerage segment rose all the way to 64 percent. The market making segment now consists of only a customer facilitation business and a few profitable markets outside the United States. Net revenues in this segment were $22 million in the quarter of which $11 million were trading gains. Commission revenue rose 16 percent despite a slightly lower cleared commission per DART of $3.86. Total non-interest expenses actually went down 4.9 percent to $174 million.

TD Ameritrade Second Quarter Earnings Fast Facts

Adjusted earnings of 89 cents per share topped analysts estimates by 10 cents per share

Revenue came in at $1.38 billion compared to estimates of $1.35 billion

Total DARTs of 784,000 up 54 percent from a year ago (Scottrade acquisition key in this number jumping so much)

Net new client assets of $20 billion in the quarter

TD Ameritrade topped expectations on the top and bottom line. Net revenues were $1.4 billion, 62 percent of which were asset-based. The acquisition of Scottrade makes it a little more difficult to compare numbers from last year to this year with TD Ameritrade, but it’s clear that the acquisition is paying off well thus far. Steve Boyle, executive vice president and chief financial officer at TD Ameritrade said in the earnings, “We’re clearly seeing the expected benefits of our Scottrade acquisition. In fact, we achieved many cost savings sooner than expected, with approximately $212 million in synergies realized through June. The strength of these results more than offset a slight decline in trading revenue compared to the prior quarter.” TD Ameritrade reported total client assets of $1.2 trillion, up 39 percent from a year ago.

Charles Schwab Second Quarter Earnings Fast Facts

Earnings rose 54 percent from a year ago and topped estimates by two cents per share

Net income was a record $866 million in the quarter

Total client assets as of the end of the quarter of $3.4 trillion 

Net interest margin expanded 18 basis points to 2.30 percent (highest since 2009)

Charles Schwab narrowly beat on the top and bottom line versus analysts estimates. Total revenues reached $2.5 billion, up 17 percent from a year ago, and the twelfth consecutive record quarter in terms of revenue. Asset management and administration fees decreased four percent from last year to $814 million. Higher client activity lifted trading revenue by 15 percent from a year ago. For the first half of 2018, trading activity is up 29 percent from last year. Schwab achieved a record 45.5 percent pre-tax profit margin in the second quarter. Importantly, digital advisory solutions sustained an asset gathering pace of around $1 billion per month. Core net new assets rose 16 percent to $53.4 billion.

Conclusion

The online broker sector continued with its very impressive earnings results in the second quarter. These companies have put together several excellent quarters in a row. Most impressive is the fact that volatility wasn’t very high in the quarter, and yet DARTs were up solidly compared to a year ago. Interest rates rising continues to help the brokers when it comes to net interest margins. Rates are expected to rise more in the coming quarters, so this should continue to help boost earnings in this sector. Analysts point to competition between online brokers as a risk here. There’s no doubt that is a risk, but thus far the brokers have diversified well enough and investors have stayed active enough for earnings to stay strong. The third quarter is typically a slow trading activity quarter, so we’ll see how the brokers fare in our next review. Can they continue their strong earnings growth?

Below is a yearly chart of all four brokers. The charts are as of the close of trading on August 2.