The publicly-traded online brokers have all released their earnings reports from the fourth quarter 2018. Each quarter StockBrokers.com takes an in-depth 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 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), Charles Schwab (SCHW), and TD Ameritrade (AMTD).
Before we get to 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 delivered earnings of $1.06 per share this year compared to 64 cents per share a year ago. Interactive Brokers earnings were 57 cents per share compared to a loss of 2 cents per share in the same quarter last year. Charles Schwab earned 41 cents per share in the fourth quarter last year, but earnings jumped to 65 cents per share this year. TD Ameritrade reported earnings jumped to $1.11 per share this year compared to only 80 cents in the same quarter last year.
E*TRADE Fourth Quarter Earnings Fast Facts
Earnings bested analysts estimates by one cent on the bottom line
Revenues came in at $735 million, lower than analysts estimates of $745 million
Operating margins came in at 50 percent compared to 47 percent a year ago
DARTs rose 25 percent from a year ago to 295,692
E*TRADE bested analysts estimates on the bottom line, but they missed on the top line. The stock market knocked down E*TRADE shares for that revenue miss. Still, E*TRADE’s $735 million in revenue was a company record, and was up significantly from $637 million a year ago in the fourth quarter. Net new brokerage accounts were 947,000 in the quarter. Excluding the acquisition of Capital One brokerage accounts, net new brokerage accounts were 35,000 in the quarter. Total customer assets finished 2018 at $414.1 billion. Average interest-earning assets were $60.1 billion. DARTs jumped 25 percent, and derivative DARTs were up 34 percent to 93,039. E*TRADE’s average commission per trade dropped ten percent from $7.41 to $6.66.
Interactive Brokers Fourth Quarter Earnings Fast Facts
Earnings of 57 cents per share missed analysts estimates of 59 cents per share
Revenues decreased 4.5 percent year over year to $492 million
Total DARTs were up by 30 percent to 951,000
Total non-interest expenses rose by 21.2 percent from a year ago
Interactive Brokers missed analysts estimates on both the top and bottom line in the fourth quarter. The jump in non-interest expenses certainly hurt the company. Profit margin came in at a solid 63 percent, though that was down from 71 percent in the same quarter a year ago. Customer accounts grew by an impressive 24 percent to 598,000 by the end of the fourth quarter. Net interest revenues increased by 26 percent at electronic brokerage segment of the company. DARTs were 951,000, which is a new record for Interactive Brokers. Interactive Brokers was hurt by their foreign currency diversification strategy in the fourth quarter as well. A mixed bag for the company overall, though the electronic brokerage segment had a solid quarter.
Charles Schwab Fourth Quarter Earnings Fast Facts
Earnings beat analysts estimates by a penny on the bottom line
Average revenue per trade edged lower by 3 percent to $7.13
DARTs surged 38 percent from a year ago to 867,000
Revenue jumped 19 percent from a year ago
Charles Schwab beat analysts estimates on both the top and bottom line with their fourth quarter earnings report. Schwab was able to increase their revenue from trading fees by 34.6 percent thanks to much higher DARTs and a very minimal dip in average revenue per trade. Clients opened 380,000 brokerage accounts in the fourth quarter. That is down just a touch from 386,000 in the same quarter a year ago. Schwab believes that is due to the market volatility in the quarter. Importantly, pre-tax profit margin rose from 42.6 percent a year ago to 45.3 percent this year. Asset management and administration fees dropped from $863 million to $755 million this year.
TD Ameritrade Fourth Quarter Earnings Fast Facts
Bottom line earnings of $1.11 easily bested analysts estimates of $1.00 per share
Total operating expenses dropped 21.8 percent from a year ago
DARTs jumped 27.7 percent year over year to 927,849
Net new client assets were up 20.8 percent from a year ago
TD Ameritrade beat analysts estimates by a wide margin on both the top and bottom line. The jump in DARTs is notable, and particularly impressive was the fact that average mobile trades per day jumped by 50 percent from a year ago to 240,000. Total client assets sat at $1.16 trillion as of December 31. The large drop in operating expenses certainly played a role in TD Ameritrade being able to comfortably top all estimates in the quarter. Commissions and transaction fees rose 22 percent from a year ago to $537 million. TD Ameritrade reported a net interest margin of 2.18 percent, which was up 47 basis points from a year ago.
The online brokers wrapped up 2018 with yet another impressive quarter. The volatility in the marketplace in the month of December definitely helped earnings out substantially. Volatility has backed off so far in 2019, so we’ll see how that impacts trading revenues in the first quarter of 2019. The industry as a whole has done a good job with being prepared for more of a move toward mobile trading and derivative-based trades. The acquisitions in the industry have made it a little more difficult to compare numbers year over year accurately, but the acquisitions have made these online brokerages much stronger in the long run. So far the brokers have done a nice job continuing to grow earnings despite the fact that commission fees were cut significantly in 2017. We’ll continue to monitor earnings as we move forward!
Below is a yearly chart of all four publicly-traded online brokers. The charts are as of close of trading on January 29.