On Friday, Interactive Brokers Group Inc. (IBKR) reported June 2011 performance data for its business segment Electronic Brokerage, which recorded a slight improvement compared with the previous month. The segment under review clears and settles trades globally for both individual and institutional clients.
Total customer accounts for the month of June were 175,600, up about 1% from 173,300 in May 2011 and 20% from 145,900 in June 2010. However, the total customer Daily Average Revenue Trades (DARTs) stood at 401,000, down 5% from the prior month but up 4% from the prior-year month.
On an annualized basis, Interactive reported Cleared Average DART per customer account of 536,000, down from 574,000 in the previous month and 611,000 in the comparable year-ago month.
Rising 9% from 20,556 in May 2011 and 12% from 19,993 in June 2010, Interactive’s total options contracts amounted to 22,398 in the reported month. Similarly, the company’s futures contracts rose 12% from the prior month and 2% from the year-ago month to 7,746 in June.
Interactive also provided period-end statistics for customer equity, customer credit balances, and customer margin loan balances. For the period ended June 2011, customer equity stood at $25.7 billion, down 1% from May 2011 end but up 57% from June 2010 end. Likewise, customer credit balances for June end totaled $17.5 billion, up from $17.2 billion at May 2011 end and $11.7 billion at June 2010 end.
Furthermore, Interactive’s Electronic Brokerage segment reported customer margin loan balances of $9.3 billion for the month under review. It reflects a 2% decrease from $9.5 billion recorded at May 2011 end but a 111% hike from $4.4 billion registered at June 2010 end.
Though fundamentals remain strong with a liquid balance sheet, sturdy capital base and high barriers to entry, we remain concerned about its Market Making segment’s ability to consistently generate sufficient return to fund dividend payment. Also, there are concerns over Interactive’s dependence on IBG LLC and its wide international exposure.
Interactive Brokers currently retains a Zacks # 3 Rank, which translates into a short-term ‘Hold’ rating. Considering the fundamentals, we maintain a long-term “Neutral” recommendation on the stock. Also, one of its peers Knight Capital Group Inc. (KCG) retains a Zacks # 3 Rank.
INTERACTIVE BRK (IBKR): Free Stock Analysis Report
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