Interactive Brokers Group, Inc. Quarterly Report for Q2 Ended Jun 30, 2010

Summary

Interactive Brokers Group, Inc. (IBKR) reported its financial results for the quarter and six months ended June 30, 2010. The company experienced a significant decline in net income and earnings per share compared to the same periods in 2009. This was primarily driven by a sharp decrease in trading gains, largely attributed to adverse foreign currency fluctuations and tighter bid/offer spreads in the market-making segment. Despite these challenges, the electronic brokerage segment demonstrated resilience, with increased commission and execution fees, reflecting higher customer trading volumes and account growth. Total net revenues decreased in both the quarterly and year-to-date periods, reflecting the impact of reduced trading gains. However, the company saw a substantial increase in net interest income, driven by higher customer cash balances and margin borrowings. While the market-making segment's profitability was severely impacted by currency translation losses and challenging market conditions, the electronic brokerage segment continued its growth trajectory, showcasing the robustness of its business model. The company maintains a strong liquidity position and substantial excess regulatory capital.

Key Highlights

• 1Diluted EPS decreased significantly by 71% to $0.09 for the three months ended June 30, 2010, compared to $0.31 in the prior year period.
• 2Total net revenues declined by 32% to $226.1 million for the three months ended June 30, 2010, primarily due to a 65% decrease in trading gains.
• 3The market-making segment's income before taxes dropped by 97% to $3.9 million for the quarter, heavily impacted by an estimated $72.0 million negative effect from U.S. dollar strengthening against other currencies.
• 4The electronic brokerage segment saw a 17% increase in income before taxes to $72.3 million for the quarter, driven by higher commission revenues and net interest income.
• 5Commissions and execution fees increased by 19% to $107.6 million for the quarter, signaling increased customer trading activity.
• 6Net interest income surged by 117% to $23.2 million for the quarter, due to higher customer cash balances and margin borrowings.
• 7Total assets grew to $27.48 billion as of June 30, 2010, with approximately 98.3% considered liquid.

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