Platforms · Software · Providers · Markets
Interactive Brokers' third-quarter net revenue edged above its second-quarter figure as higher net interest income outweighed lower commission revenue. Separately, its board raised the quarterly dividend from $0.0875 to $0.15 per share, payable on 14 December to shareholders of record on 1 December.
Client balances support interest income
Adjusted net revenue was $1.87 billion, with pretax income of $1.45 billion and diluted earnings of $0.67 per share. The adjusted pretax margin was 78%, compared with 79% a year earlier. Average customer margin loans expanded 47% year over year to $104.0 billion from $70.8 billion, while average customer credit balances increased 25% to $176.6 billion.
Those larger balances lifted net interest income as yields narrowed. Net interest margin stood at 1.99%, against 2.16% a year earlier. Customer margin loans carried an annualised yield of 4.25%, versus 4.60% previously; yields on segregated cash and securities were 3.40%, against 3.81%. The reported growth therefore came alongside lower returns on those balances.
Trading flows and costs diverge
Average DARTs reached 4.27 million, 18% above the year-earlier quarter but 11% below Q2. Commission revenue consequently moved down from $673 million in Q2 to $602 million. Customer futures volume grew 13% year over year; stock volume contracted 24% and options volume 1%. Average commission per cleared commissionable order slipped 4% to $2.59.
Expenses for distribution, clearing and execution climbed 46% to $134 million, largely reflecting a $30 million rise in regulatory fees after an increase in the SEC's Section 31 transaction fee rate. Interactive Brokers passes those charges on to customers.
It ended September with 5.58 million customer accounts, up 35% year over year, and $964.7 billion in customer equity, an annual increase of 27%. The results were first reported by Finance Magnates.
What this means on the desk
For finance and platform teams, the figures separate two drivers: customer balances expanded while trading activity fell from Q2 and interest yields declined. Operators should check whether internal revenue reporting distinguishes balance growth from commission activity, and whether customer margin-loan and credit-balance figures reconcile across the systems used for reporting. The source does not specify the reconciliation process.
The higher regulatory charges were passed through to customers, but the report does not explain how that is implemented. Billing and operations teams should verify that fee schedules reflect the SEC Section 31 rate change and that customer charges reconcile with the fees recorded internally.
