Interactive Brokers closes 2016 with double-digit growth in net revenue

Interactive Brokers closes 2016 with double-digit growth in net revenue

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Multi-asset automated brokerage Interactive Brokers (NASDAQ:IBKR) reported on Tuesday a net revenue growth of 17.4% to $1.2 billion in 2016. Its pre-tax income stood at 761 million last year, which is 66.2% higher than a year earlier.

In 2016, Interactive Brokers’ pre-tax profit margin stood at 55%. In the electronic brokerage segment alone, pre-tax profit margin increased by 12 percentage points to 61%. Market making pretax profit margin, however, dropped to 22% in 2016 from 44% in 2015.

“In addition, the results for the year include a $65 million loss on our currency diversification strategy, compared to a $269 million loss in 2015; and a $26 million net mark-to-market gain on our US government securities portfolio compared to a $33 million net mark-to-market loss in 2015,” the broker’s statement read.

The broker said its improved financial results were positively affected by a strong 24% growth in net interest income, as well as the lack of events that caused sudden market shifts, such as the Swiss franc movement in 2015. Net revenue also grew on the back of net mark-to-market gains on US government securities portfolio, partially offset by slightly lower commissions and execution fees revenue.

“Trading gains decreased 39% in 2016 on lower market making trading volumes and decreases in volatility and in the actual-to-implied volatility ratio compared to 2015,” Interactive Brokers noted.

The broker also provided some trading metrics for last year. Its daily average revenue trades (DARTs) increased 2% to 660,000 in 2016.

Meanwhile, the number of customer accounts opened with Interactive Brokers increased by 16% on the year to 385,000 in 2016. Earlier this month, the broker published monthly trading data for December, according to which during the month it had DARTs of 592,000 and handled 385,100 client accounts.

In 2016, customer equity grew 27% to $85.5 billion and customer debits increased 14% to $19.4 billion. In the brokerage segment, equity was $4.1 billion.

The broker adopted in 2016 a strategy to diversify its currency offering.

“In connection with our currency diversification strategy, we have determined to base our net worth in GLOBALs, a basket of 15 major currencies in which we hold our equity. In 2016, our currency diversification strategy decreased our comprehensive earnings by $65 million, as the U.S. dollar value of the GLOBAL decreased by approximately 0.93%,” the broker said.

Connecticut-based Interactive Brokers is a broker and a market maker. Through its numerous subsidiaries, the company offers online automated trading in stocks, options, futures, forex, bonds, contracts for difference (CFDs) and funds. It serves retail and institutional clients in over 120 market across the globe. The brokerage has offices in the North America, Europe, Australia, and Asia. The group companies hold licenses by the relevant authorities in the US and the UK.

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