Interactive Brokers Group, Inc. (IBKR) 1Q25 Earnings Review
Earnings Miss Street Forecast But Client Growth Metrics Remain Strong; Recent Volatility Should be Positive for Commissions but Likely Weighs on Margin Lending
IBKR Earnings Summary – EPS Comes in a Touch Below Consensus Forecast
IBKR reported earnings after the close today. Total adjusted net revenue came in at $1,396M, down 2% Q/Q but up 15% Y/Y. The sequential decrease in revenue was driven by a decline in net interest income (NII), which fell 5% Q/Q but was up 3% Y/Y to $770M. Meanwhile, commission revenue increased by 8% Q/Q (+36% Y/Y) to a record $514M. On the expense side, total operating expenses came in at $372M, which was up 7% sequentially (+10% Y/Y), and drove pre-tax margins to 73.4% (down 230bps Q/Q but up 110bps Y/Y). Adjusted diluted EPS came in at $1.88, down 14% Q/Q (+25% Y/Y).
Relative to consensus estimates, revenue came in a touch light (<1%) of the consensus forecast of $1,405M. Meanwhile, pre-tax income was about 2% lighter than the street while expenses were 3% above expectations and adjusted EPS came in about 2% below consensus.
In terms of key operating metrics, average interest earning assets for the quarter increased 3% sequentially (+21% Y/Y) while the net interest margin (NIM) fell 13 bps Q/Q (-31bps Y/Y) to 2.10%. Client accounts at quarter end increased 8% from the end of 2024 (+32% Y/Y) while customer equity increased 1% Q/Q (+23% Y/Y) to $574B. Total customer daily average revenue trades (DARTs) for the quarter were 3,519k (+13% Q/Q, +50% Y/Y) and the average commission per cleared commissionable order came in at $2.76 (+1% Q/Q, -6% Y/Y).
IBKR Earnings Summary and Key Operating Metrics
Source: company data and Tikr.com
Highlights from IBKR Earnings Call and Press Release
In terms of the outlook going forward, IBKR 0.00%↑ management touched on several details during this evening’s earnings call that are worth highlighting:
Securities Lending Revenue – has remained muted due to fewer hard to borrow names industrywide as well as the muted IPO and M&A environment
Trading Activity in 2Q25 – the company saw record volumes during the market volatility in early April
Margin Loans – customers reduced risk exposure during early April volatility, driving margin loans down 10-12%
Client Accounts – saw a significant increase in number of new approved accounts in early April
Benchmark Interest Rates – a 1% decrease in all benchmark interest rates would decrease annual NII by $364M (amounts to about 12% impact to NII based on annualized 1Q25 reported results)
SEC Fees – the SEC reduced its fee rate to $0 effective, May 15. SEC fees in 1Q25 amounted to $27M - should reduce both commissions and transaction-based expenses by a similar amount going forward
G&A Expenses – increased 24% Y/Y in 1Q due to an expansion of the company’s advertising
Other notable highlights from the earnings call/press release:
Dividend – increased quarterly cash dividend by 28% to $0.32
Stock Split – Announced 4 for 1 stock split to holders of record, Monday, June 16
Crypto Currency Expansion – given changes in the regulatory environment, IBKR increased the number of crypto currencies offered on the platform and increased how much crypto assets a client account can hold from 10% to 30%
M&A – continuing to look at opportunities but tend to be far apart with sellers on price due to negative revenue implications from IBKR’s pricing structure and interest rates offered to clients
Broad Thoughts / Outlook
While the EPS miss to consensus is unfortunate, broadly I thought the 1Q results were solid. The overall key metrics continue to impress as IBKR adds client accounts and customer equity at an insane clip. In the near term, client deleveraging with margin balances declining is likely to be a bit of a headwind to NII. However, I would anticipate clients will re-engage with the markets once they have a better sense of direction (though, as I’ve stated previously, uncertainty seems to be the only certainty in the market right now, so that could take longer than some investors would like with IBKR shares). As such, I am not entirely surprised to see the shares coming under pressure post-close.