01—Abstract
Summary
Summary of the 10-K filed February 28, 2020. Cited figures are marked; the original filing is the authoritative source.
Interactive Brokers Group, Inc. (IBKR) reported its 2019 annual results, highlighting a robust electronic brokerage segment that continued to be the primary driver of revenue and profitability.
The company serves a diverse global client base of approximately 690,000 institutional and individual investors, offering a technologically advanced, low-cost trading platform. Despite a slight decrease in commissions due to lower market volatility, net revenues saw a modest increase, primarily driven by strong net interest income resulting from higher customer credit balances and increased average benchmark rates. The company is in the process of winding down its market-making activities, significantly reducing its exposure in this segment.
IBKR maintains a strong liquidity position and compliance with regulatory capital requirements across its global operations. The report also details the company's ongoing legal and regulatory matters, which management does not anticipate having a material adverse effect on financial results.
02—Key points
Key Highlights
- Electronic brokerage is the core revenue driver, comprising 97% of net revenues from combined segments.
- Total net revenues increased by 2% to $1.94 billion, driven by a 17% increase in net interest income, partially offset by a 9% decrease in commissions.
- Customer accounts grew by 15% year-over-year to 690,000, and customer equity increased by 36% to $174.1 billion.
- The company is actively reducing its market-making operations, having exited Canadian market making and substantially reducing options market making globally.
- Interactive Brokers maintains strong regulatory capital compliance, with aggregate excess regulatory capital of $6.4 billion across its operating subsidiaries.
- Diluted EPS was $2.10 for the year, a slight decrease from $2.28 in the prior year.
- A significant customer bad debt expense of $42 million was recognized in 2019 related to margin lending losses.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 28, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $2.58B$2.37B | +9.0% |
| Interest Expense | $643.00M$463.00M | +38.9% |
| Net Income | $161.00M$169.00M | −4.7% |
| EPS (Basic) | $0.53$0.57 | −8.3% |
| EPS (Diluted) | $0.53$0.57 | −7.9% |
| Shares Outstanding (Basic) | 304.49M293.75M | +3.7% |
| Shares Outstanding (Diluted) | 307.30M297.07M | +3.4% |
05—Questions
Frequently Asked Questions
What is the main business segment for Interactive Brokers?
The primary business segment is electronic brokerage, which accounted for approximately 97% of net revenues from combined segments in 2019. The company also engages in market making, though this segment is being discontinued.
How did the company's revenue perform in 2019?
Total net revenues increased by 2% to $1.94 billion in 2019. This growth was largely driven by a 17% increase in net interest income, which offset a 9% decrease in commission revenue due to lower market volatility.
What is the company's outlook regarding its market-making business?
Interactive Brokers is in the process of winding down its market-making activities. They have exited most options market making globally and discontinued market making operations in Canada. The company intends to continue certain proprietary trading activities to facilitate brokerage customer trades but does not expect them to be significant enough to report as a separate segment.
How is the company positioned regarding regulatory capital and liquidity?
The company maintains a strong liquidity position, with approximately 99.2% of its total assets considered liquid as of December 31, 2019. Furthermore, all operating subsidiaries were in compliance with their respective regulatory capital requirements, with aggregate excess regulatory capital totaling $6.4 billion.
06—Continue