The earnings season is over for the online brokers. All of the 2017 fourth quarter reports have been released. Every 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’ll then take a deeper dive into their results. At the close of this post, we’ll summarize what these reports mean for the online brokerage sector in general. Here is a look at the results from Interactive Brokers (IBKR), E*TRADE (ETFC), TD Ameritrade (AMTD), and Charles Schwab (SCHW).
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 a year ago. Adjusted earnings at Interactive Brokers came in at 43 cents compared to only 7 cents per share last year. E*TRADE reported adjusted earnings of 64 cents per share in the quarter. E*TRADE earned 46 cents per share last year. TD Ameritrade reported 80 cents per share in the first quarter. They earned 43 cents a year ago. Charles Schwab reported adjusted earnings of 44 cents per share compared to 36 cents per share a year ago.
Interactive Brokers Fourth Quarter Earnings Fast Facts
Adjusted earnings of 43 cents per share beat analysts estimates of 39 cents per share
Total DARTs were 730,000- up 14 percent from a year ago
Total non-interest expenses were down 8.5 percent in the quarter
Revenues were up 167 percent to $505 million in the quarter
Interactive Brokers earnings were negatively impacted by 45 cents per share by the federal tax reform in the fourth quarter. Interactive Brokers lost two cents per share on a comprehensive basis, but their earnings were 43 cents per share on an adjusted basis. We are using the 43 cents per share figure for an apples to apples comparison of how the company is doing. Pre-tax profit margin came in at 71 percent compared to only 15 percent a year ago. Net revenues jumped 32.7 percent to $390 million in the electronic brokerage segment. Net revenues dropped to $25 million in the market making segment. Interactive Brokers completed the transfer of their options market making business during the quarter. In the electronic brokerage segment, customer accounts jumped 25 percent from a year ago. Customer equity rose by 46 percent compared to the fourth quarter last year.
E*TRADE Fourth Quarter Earnings Fast Facts
Revenue jumped 25.1 percent from a year ago to $637 million
Total DARTs were up 26 percent year over year to 236,000
Total non-interest expenses were up 13 percent from a year ago
Customer margin balances of $9.1 billion- a new record for the company
E*TRADE recognized $58 million in additional tax expenses in the fourth quarter due to the federal tax reform passed in December. We used the adjusted earnings for a proper comparison here. Non-interest income was down by 1.4 percent to $218 million. That slight decrease was due to lower commissions, but it was largely offset by higher service charges and fees. Net interest income surged 45.5 percent from last year due to higher interest income and lower interest expenses. Total customer assets came in at $383.3 billion, up 23 percent from a year ago. E*TRADE reported 5.4 million customer accounts as of the end of the fourth quarter. Credit quality continued to improve significantly as E*TRADE improves its balance sheet.
TD Ameritrade Fourth Quarter Earnings Fast Facts
Total DARTs jumped 49 percent to 726,000
Total client assets sit at $1.2 trillion- up 48 percent from last year
Net revenues surged 46.3 percent from a year ago to $1.26 billion
Interest-rate sensitive assets of $156 billion- up 25 percent from last year
TD Ameritrade reported 80 cents per share, which easily bested analysts estimates of 50 cents per share. Revenue for the quarter came in at $1.3 billion compared to expectations of $1.2 billion. The company reported record net new client assets of $26.5 billion, which is a growth rate of nine percent. Pre-tax income came in at $303 million, or 24 percent of net revenues. The acquisition of Scottrade is proving to be a big positive for TD Ameritrade. TD Ameritrade President and CEO Tim Hockey said, “Our enhanced competitive position and increased scale, thanks to our recent acquisition of Scottrade, is further accelerating our earnings power, which we expect to continue following the final clearing conversion.”
Charles Schwab Fourth Quarter Earnings Fast Facts
Schwab reported net income of $597 million, up 14 percent from last year
Matched analysts estimates of 41 cents per share in the quarter
Revenue rose 14 percent to $2.24 billion
Trading revenue fell 24 percent to $154 million
Charles Schwab matched analysts estimates on the bottom line and narrowly beat estimates on the top line in the quarter. Schwab reported a one-time expenses of 3 cents per share related to the recent tax law. The trading revenue falling 24 percent was notable due to the trade pricing discount. Schwab saw the average revenue per trade drop 34 percent. On the other hand, DARTs were up 10 percent in the quarter. Investor services reported that retail brokerage accounts jumped by 248,000. That is an impressive 36 percent increase from a year ago. Client assets managed by the digital advisory solutions at Schwab totaled $27.3 billion at the end of the fourth quarter. That’s up 122 percent from a year ago. Total client assets were at $3.36 trillion at the end of the quarter, and that is up 21 percent from last year.
The brokers finished out 2017 with a very strong quarter. Considering all the question marks that arose during the year surrounding trading prices getting slashed, I think everyone in the sector has to be very happy with how things have gone. The stock market doing very well is obviously a boost to the business of the brokers, and all of the online brokers stocks are at or near a record high. Most importantly, the brokers continue to bring in new client assets at a very impressive pace. A big help for brokers has been the rising interest rate environment. More rate hikes are expected in the year ahead, which should continue to help earnings in this sector.
The brokerages have soundly beaten estimates in the past couple quarters. A very good quarter for the brokers, and the year as a whole was a very positive one for the sector.
Below is a yearly chart of all four brokers. The charts are as of the close of trading on January 30.