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What’s in Store for Interactive Brokers Group in Q2 2018?

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What to expect

Interactive Brokers Group (IBKR) is expected to report its second-quarter earnings on July 17. It’s expected to generate lower commissions on a sequential basis, primarily due to macro factors such as faster rate hike expectations and geopolitical tensions with North Korea. Those factors brought a tremendous spike in volatility in the first quarter. Those events tend to prompt investors to reshuffle their portfolio holdings.

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However, the Trump administration’s deal with North Korea brought some calm to the broad markets in the second quarter. Interactive Brokers Group’s expected second-quarter EPS of $0.48 represents a YoY (year-over-year) rise and a sequential decline. In the first quarter, its commission revenues accounted for 35.4% of its total revenues. During the same period, brokerages saw higher client participation.

IBKR’s projected Q2 2018 revenues

The expectations of faster interest rate hikes and strong market movements support brokerages’ business fundamentals. Higher rates lead to higher interest margins, which in turn result in growth in net interest income. However, since the yield curve has flattened, the margins are expected to stabilize for brokers and banks in the upcoming quarters.

In the first quarter, the company’s interest income accounted for 50% of its total revenues. Its expected second-quarter revenues of $438.62 million imply a YoY rise of 13.3%. In the second half of 2018, equities could see volatility primarily due to rising trade tensions between the United States and China.

Interactive Brokers Group’s peers (VFH) are expected to report the following EPS results in the second quarter:

  • Charles Schwab (SCHW): $0.58
  • E*TRADE Financial (ETFC): $0.88
  • TD Ameritrade Holding (AMTD): $0.80

In this series, we’ll be looking at factors that are affecting Interactive Brokers Group in the second quarter. We’ll look at its daily average revenue trades, net interest income, commissions, valuations, and analyst ratings.

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