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Interactive Brokers Group, Inc. (IBKR)·Q4 2024 Earnings Summary

Executive Summary

  • Record quarter: GAAP net revenues $1.387B and diluted EPS $1.99; adjusted net revenues $1.424B and adjusted EPS $2.03, with a record pretax income >$1B and pretax margin of 75% (76% adjusted) .
  • Strength driven by higher trading activity (commissions +37% to $477M) and net interest income (NII +11% to $807M), while options and stock volumes rose 32% and 65% YoY; futures volumes fell 3% .
  • KPIs inflected positively: accounts +30% to 3.34M, customer equity +33% to $568.2B, DARTs +61% to 3.12M; margin loans +45% to $64.2B, credits +15% to $119.7B .
  • Management reiterated no buybacks, may consider dividend increases over time; quarterly dividend maintained at $0.25 per share payable Mar 14, 2025 .
  • Estimates context: S&P Global consensus was unavailable at time of retrieval; relative performance versus estimates cannot be confirmed. Management’s rate-cut sensitivity implies potential NII headwinds if policy rates decline further, partly offset by margin loan and account growth .

What Went Well and What Went Wrong

What Went Well

  • Commission revenue reached a record $477M (+37% YoY) on robust options (+32%) and stock (+65%) customer volumes; execution and clearing costs were 19% of commissions, driving an 81% gross transactional margin as described by the CFO .
  • Net interest income of $807M (+11% YoY) benefited from higher average margin loans (+41%) and customer credit balances, and disciplined short-duration treasury positioning under 30 days to maximize short-term yields .
  • Strategic product enhancements: added four options ATS liquidity providers; launched “Overnight Smart” order type and broadened overnight trading; rolled out an AI-powered commentary builder for FAs with thousands of uses to date .

What Went Wrong

  • Securities lending revenue optics remained soft amid fewer hard-to-borrow names and strong equity markets; management noted that reclassifying cash collateral effects would imply ~$182M quarterly securities lending net revenue this quarter versus ~$156M in 4Q23 .
  • Other income included non-core items, notably currency diversification losses ($18M in other income; -$248M in OCI) and mixed Tiger Brokers marks (+$34M realized, -$10M unrealized) .
  • New FINRA CAT fee and higher SEC fee rate lifted execution, clearing, and distribution expenses to $115M (+15% YoY), while G&A rose 31% to $59M primarily on advertising .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Net Revenues ($USD Millions)$1,230 $1,365 $1,387
Adjusted Net Revenues ($USD Millions)$1,290 $1,327 $1,424
Diluted EPS ($USD)$1.65 $1.81 $1.99
Adjusted Diluted EPS ($USD)$1.76 $1.75 $2.03
Income Before Taxes ($USD Millions)$880 $987 $1,040
Adjusted Income Before Taxes ($USD Millions)$940 $949 $1,077
Pretax Margin % (Reported)72% 72% 75%
Pretax Margin % (Adjusted)73% 72% 76%
Commissions ($USD Millions)$406 $435 $477
Net Interest Income ($USD Millions)$792 $802 $807
Other Fees & Services ($USD Millions)$68 $72 $81
Other Income (Loss) ($USD Millions)($36) $56 $22
Total Non-Interest Expenses ($USD Millions)$350 $378 $347

Segment/driver breakdown:

Revenue Components ($USD Millions)Q2 2024Q3 2024Q4 2024
Commissions$406 $435 $477
Net Interest Income$792 $802 $807
Other Fees & Services$68 $72 $81
Other Income (Loss)($36) $56 $22

Key KPIs:

KPIQ2 2024Q3 2024Q4 2024
Total Accounts (thousands)2,924 3,120 3,337
Customer Equity ($USD Billions)$497.2 $541.5 $568.2
Total Customer DARTs (thousands)2,386 2,703 3,118
Customer Credits ($USD Billions)$107.1 $116.7 $119.7
Customer Margin Loans ($USD Billions)$55.1 $55.8 $64.2
Commission per Cleared Order ($USD)$3.01 $2.83 $2.72
Cleared Avg. DARTs per Account (Annualized)187 198 213

Net interest margin:

NIM MetricsQ2 2024Q3 2024Q4 2024
Net Interest Margin (%)2.42% 2.37% 2.23%
GAAP Net Interest Income ($USD Millions)$792 $802 $807
NIM-based Net Interest Income ($USD Millions)$805 $826 $830

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per shareNext payment$0.25 (Q3 declared) $0.25 payable Mar 14, 2025; record Feb 28, 2025 Maintained
Share repurchasesOngoingNo formal program“No plan to do any type of share repurchasing”; may consider dividend increases over time Maintained (no buybacks)
Pretax margin focusOngoing~72% recentRecord 75% (76% adjusted); not optimizing to push higher per CEO Maintained discipline
Fixed expense growthFY 2024-2025Low double-digit historicallyExpect similar pace; advertising a contributor Maintained
Marketing/advertising2025N/AMarketing spend “slowly increasing” to attract individual accounts Increasing
NII sensitivity to USD ratesForwardN/A25bp Fed cut → ~$64M annual NII reduction; 1% all benchmarks → ~$339M reduction New/Restated sensitivity disclosure
Crypto product scopeNear termHK offering liveIntend to offer crypto trading in EU; potential increase in token coverage and account crypto allocation cap (>1%) as regulation clarifies Expansion considered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2, Q3)Current Period (Q4 2024)Trend
AI/technology for FAsPortfolioAnalyst enhancements; compliance automation in-house Generative AI-powered commentary builder integrated with PortfolioAnalyst; thousands of uses Expanding capabilities
Options ATS & tradingOptions ATS enhancements; crossing session; record options volumes Added 4 options ATS liquidity providers; options volumes up 32% YoY Strengthening liquidity and volume
Overnight/global trading22-hour bonds; overnight CFDs; Malaysia/Dubai expansion “Overnight Smart” order type; broad overnight coverage; launched Saudi Exchange Broader reach
ForecastEx (prediction markets)CFTC approval; launch timing; initial traction; election contracts Building carefully; election trading as on-ramp; aim for economic/climate markets; another broker participates Gradual scale-up
Securities lending dynamicsReclassification context; demand weaker; IPO/M&A lull Environment still softer; reclass basis implies ~$182M vs $156M prior year Mixed; structural tailwinds contingent on market
Rates/NII sensitivityDetailed sensitivities; short-duration positioning 25bp USD: -$64M; full 1% all currencies: -$339M; duration <30 days Managed but rate-cut headwinds
Crypto strategyUK/HK offering; recurring investments; cautious expansion EU crypto offering targeted; more tokens; consider raising 1% cap as rules firm Expansion pending regulation
Prime brokerage (high touch)Service launched; ~30 hedge funds onboarded; goal to retain >$100M AUM funds Capital introduction revamped; 240 participants; 34 hedge funds avg $160M AUM Building momentum

Management Commentary

  • “Our quarterly pretax income was a record, reaching over $1 billion for the first time, while our GAAP pretax margin rose to 75% for the quarter.”
  • “Net interest income also reached a quarterly record of $807 million… despite multiple rate cuts in nearly all the major currencies.”
  • “We integrated a generative AI-powered commentary builder feature… allowing FAs to generate reports showing clear detailed portfolio data and commentary.”
  • “We introduced a new [overnight] order type called Overnight Smart… to specifically cover overnight trading hours.”
  • “Given market expectations of further rate cuts… a 25 basis point decrease in [Fed funds]… ~$64 million reduction in annual net interest income… full 1% decrease… ~$339 million.”
  • “Well, there is no plan to do any type of share repurchasing. We will… consider increasing the dividend…”

Q&A Highlights

  • Expenses and execution costs: CFO highlighted smart routing/venue rebates; execution and clearing at 19% of commissions yields 81% transactional margin when excluding non-transaction costs .
  • Capital and capital allocation: CEO reiterated no buybacks; dividend increases considered; strong equity base supports institutional growth and non-US margin funding needs .
  • Account growth outlook: Marketing spend to increase; bullish on continued account additions given market enthusiasm .
  • Margin balances: Expect maintained/slightly higher balances, correlated with market; individuals and sophisticated cohorts deploy more leverage .
  • Prime brokerage high-touch: Capital introduction events doubled participation to 240; 34 hedge funds onboarded, avg $160M AUM; goal is retention as funds scale .
  • Crypto roadmap: Plan EU launch; broader token coverage (e.g., Solana) as regulatory clarity improves; may raise 1% account crypto allocation cap over time .

Estimates Context

  • S&P Global consensus estimates were unavailable at time of retrieval; therefore, a formal actual-versus-estimate comparison cannot be provided (consensus unavailable).
  • Given management’s rate-cut sensitivity, sell-side models may need to reflect potential NII headwinds from further policy easing, with offsets from margin loan growth, higher accounts/DARTs, and commissions from elevated equity/options activity .

Key Takeaways for Investors

  • Operating leverage intact: Record commissions, robust NII, and disciplined expense control delivered 75% reported pretax margin in Q4, with adjusted margin at 76% .
  • Volume-led upside: Options and stock activity surged (+32%/+65% YoY), lifting commissions; DARTs per account rose, while commission per order moderated with mix shift toward equities .
  • Rate path matters: NII sensitivity (~$64M per 25bp Fed cut; ~$339M per 1% global cuts) is a key macro lever; short-duration positioning mitigates duration risk .
  • Strategic differentiation: Technology upgrades (AI tools for FAs, ATS liquidity), global market access (Saudi Exchange), and overnight trading breadth support share gains across segments .
  • Institutional build-out: High-touch prime brokerage and enhanced capital introduction are resonating, with 34 hedge funds onboarded (avg $160M AUM) and rising event participation .
  • Capital allocation: No buybacks; dividend maintained at $0.25 with openness to increases over time; strong equity base ($16.6B) underpins growth and credibility with institutional clients .
  • Near-term trading lens: Elevated client activity and margin balances suggest supportive commission trends; watch for securities lending pickup if IPO/M&A cycles improve .
Notes:
- All quantitative figures and statements are sourced from IBKR’s Q4 2024 8-K/press release and earnings call, and prior quarters’ filings/transcripts. 
- S&P Global consensus estimates were unavailable at retrieval; estimate comparisons are therefore not provided.