Interactive Brokers’ Q3 Profit Rises on Margin Lending and Trading Surge
Oct 16 (Reuters) — Interactive Brokers Group reported a rise in third-quarter profit as higher customer trading activity and growing margin loans lifted revenue, even as looming rate cuts threaten to squeeze future interest income.
The Greenwich, Connecticut-based brokerage posted net income of $1.31 billion, or 59 cents per share, up from $909 million, or 42 cents, a year earlier. Adjusted earnings were 57 cents per share.
Net revenues climbed to $1.66 billion, up from $1.37 billion a year ago, driven by stronger lending income and higher client activity across asset classes. Pretax profit margin stood at 79%, compared with 67% in the identical quarter of 2024.
The company’s net interest income — the difference between what it earns on assets and pays on liabilities — rose 21% to $967 million, bolstered by higher average margin loans and customer cash balances. Brokerages such as Interactive Brokers have benefited from the elevated interest-rate environment by investing idle client funds in short-term instruments.
However, the Federal Reserve’s September rate cut could begin to compress margins begining in the fourth quarter. Further rate reductions, while weighing on interest income, may boost margin trading and lift commission revenue, the company noted.
Trading activity remained robust. Commission revenue jumped 23% to $537 million, reflecting a 67% surge in customer stock trading volumes and a 27% increase in options trading. Daily average revenue trades (DARTs) rose 34% year-on-year to 3.62 million.
Interactive Brokers’ customer accounts grew 32% to 4.13 million, while customer equity rose 40% to $757.5 billion. The company’s margin loans increased 39% to $77.3 billion, and customer credits climbed 33% to $154.8 billion.
Operating expenses declined sharply, with general and administrative costs falling 59% to $62 million, assisted by the non-recurrence of $88 million in prior legal and regulatory expenses and $12 million related to European subsidiary consolidation. Those savings were partly offset by $10 million in higher advertising spend.
The firm’s execution, clearing, and distribution fees fell 21% to $92 million, assisted by the SEC’s elimination of the Section 31 transaction fee earlier in the year and higher liquidity rebates from platforms.
Interactive Brokers’ total equity reached $19.5 billion at quarter end. The board declared a quarterly dividend of $0.08 per share, payable on Dec. 12 to shareholders of record on Dec. 1.
The company, which joined the S&P 500 in August later than replacing Walgreens Boots Alliance, continues to diversify its offerings. Its platform lets clients trade stocks, options, futures, bonds, ETFs, mutual funds, precious metals, and cryptocurrencies, the latter through third-party custodians handling execution and securekeeping.
Other income rose 52% to $85 million, largely from investment gains, though partly offset by smaller foreign platform benefits. The firm’s currency diversification strategy trimmed comprehensive earnings by $33 million, reflecting a 0.25% decline in the value of its proprietary basket of global currencies.
