All of the publicly-traded online brokers have released their earnings reports from the third quarter. Every quarter StockBrokers.com takes an in-depth look at the earnings reports from these brokers. We start off 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 TD Ameritrade (AMTD), Charles Schwab (SCHW), E*TRADE (ETFC), and Interactive Brokers (IBKR).

Before we get into the individual reports, let’s take a quick look at how each company did on an earnings per share basis compared to the same quarter a year ago. TD Ameritrade more than doubled last year’s 39 cents per share number on the bottom line. TD Ameritrade brought in an adjusted number of 92 cents per share this year. That was adjusted for non-recurring items. Charles Schwab reported earnings that rose from 42 cents a year ago to 65 cents per share this year. E*TRADE reported earnings per share of 88 cents per share after a one-time benefit, and that compares to only 49 cents per share last year. Interactive Brokers reported 51 cents per share compared to 43 cents per share in the previous year.

TD Ameritrade Third Quarter Earnings Fast Facts

Revenue jumped 42 percent to $1.4 billion

Analysts had expected TD Ameritrade to earn just 88 cents per share

Daily Average Revenue Trades (DARTs) came in at 750,000

Net new client assets were $24 billion in the quarter

TD Ameritrade beat analysts estimates on both the top and bottom line in the third quarter. The DARTs number here is the headliner for me. DARTs were up a whopping 50 percent from a year ago. The company also reported that there have been 16 days in the year with one million or more DARTs. Client assets ended the quarter at $1.3 trillion, which was up 16 percent from a year ago. The company reported a pre-tax profit margin of 43.6 percent. TD Ameritrade’s acquisition of Scottrade has gone very smoothly, and most analysts pointed to it helping TD Ameritrade in this past quarter. TD Ameritrade also announced a 43 percent dividend increase during their earnings press release.

Charles Schwab Third Quarter Earnings Fast Facts

Matched analysts estimates of $2.58 billion in revenues

Trading revenues were up 16.7 percent from last year

Total non-interest expenses rose 11 percent from a year ago

Pre-tax profit margin improved from 43.6 percent last year to 47.3 percent this year

Charles Schwab beat the average analyst estimate by a penny on the bottom line. Schwab matched analysts estimates on the top line. Schwab reported total client assets of $3.56 trillion, which was up 12 percent from a year ago. The company added 369,000 new brokerage accounts in the third quarter. Net new assets were $53.5 billion, which was a four percent increase from last year. The company did report a six percent fall in asset management and administration fees. The rise in non-interest expenses was a bit of a cause for concern. Net interest revenue jumped 41 percent year-over-year to a record $1.5 billion.

E*TRADE Third Quarter Earnings Fast Facts

DARTs were up 29 percent from a year ago to 266,290

Average commission per trade dipped nine percent to $7.04

Gross new brokerage accounts came in at 165,381- up 57 percent from last year

Net new customer assets were up 62 percent from a year ago to $3.4 billion

E*TRADE beat analysts estimates by six cents per share on the bottom line. Revenues of $720 million easily bested analysts estimates of $715 million as well. E*TRADE reported net interest income that rose 19.2 percent from a year ago to $466 million. Impressively, E*TRADE’s non-interest expenses dropped by 6.2 percent from a year ago. That was largely thanks to reduced losses on early extinguishing of debt. E*TRADE finished the quarter with 6 million customer accounts (3.9 million brokerage accounts). E*TRADE has been aggressive when it comes to improving credit quality and that continued. E*TRADE reported allowance for loan losses plunged 56.4 percent from a year ago. E*TRADE also announced a $1 billion share buyback.

Interactive Brokers Third Quarter Earnings Fast Facts

Reported net revenues of $439 million which was short of analysts estimates for $453 million

Total DARTs were up ten percent from a year ago to 763,000

Pre-tax profit margin jumped to 66 percent at the electronic brokerage segment

Non-interest expenses rose by 3.2 percent in the quarter

Interactive Brokers beat analysts estimates by a narrow margin on the bottom line, but they missed estimates on the top line. Net revenues were up 21 percent in the electronic brokerage segment. Market making revenues were down to $16 million, but Interactive Brokers is getting out of the business, and I don’t see the drop in revenues here as all that significant. DARTs were up ten percent during the quarter. The company did note that the fourth quarter had seen increased DARTs thus far with the volatility in the market rising. The average cleared commission dropped by five percent to $3.78. Total accounts at Interactive Brokers grew 26 percent faster than the same quarter a year ago.

Conclusion

This sector has been watched very closely by many thanks to several changing dynamics. The commission battle has led to significant drops in pricing which is clearly seen as a headwind. At the same time, as interest rates rise it is a boost for this sector. Additionally, all of the brokers continue to bring on new customers and assets at a very impressive pace. The third quarter is known to be a slow quarter volume-wise in the market, and yet on the whole I believe the online brokerage sector reported solid results here. Some of the brokers looked a little stronger than others in this quarter, but none of them had bad reports. Volatility has been much higher early in the fourth quarter, so I’m looking forward to seeing what it means for the earnings reports next time around.

Below is a yearly chart of all four brokers. The charts are as of the close of trading on November 7.