Interactive Brokers Group (IBKR) garners its total revenues from four components: commissions, trading gains, interest income, and other income. Total net revenues are calculated after the deduction of interest expenses from total revenues. The company generated total net revenues of $1.7 billion in 2017 compared to $1.4 billion in 2016, a 22% increase mainly due to a rise in commissions as well as other income. However, net interest income was another primary contributor.
The rise in net revenues was partially offset by a decline in trading gains. In 1Q18, the company is expected to be positively impacted by volatility in equity markets, as volatility leads to higher trading activity, thus generating trading revenues for the company.
Higher volatility could also positively impact the March 2018 quarterly results of other brokerage giants (XLF) like TD Ameritrade Holding (AMTD), E*TRADE (ETFC), and Charles Schwab (SCHW), as their trading revenues could see a positive impact.
Rise in commissions YoY
Interactive Brokers Group generated commission revenues of $647 million in 2017 compared to $612 million in 2016, which implies an increase of 6%. This rise was seen on the back of growth in customer accounts as well as increased trading volumes with respect to stocks as well as options. However, a rise in the average commission also contributed.
Interactive Brokers saw a substantial increase in its daily average revenue trades (or DARTs) in March 2018 on a YoY basis, which could also positively impact its 1Q18 results.
In this series, we’ll look at IBKR’s March 2018 metrics, what could benefit IBKR moving forward, and past performance. We’ll also study the company’s valuations as well as analysts’ ratings on it.