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Post Earnings Coverage as Interactive Brokers' Earnings and Revenues Lag Behind Market Expectations

Upcoming AWS Coverage on Goldman Sachs Group Post-Earnings Results

LONDON, UK / ACCESSWIRE / January 19, 2017 / Active Wall St. announces its post-earnings coverage on Interactive Brokers Group, Inc. (NASDAQ: IBKR). The Company reported its fourth quarter and fiscal 2016 results on January 17, 2017. The electronic broker and market maker Q4 2016 earnings tumbled 72%, driven by a 29% drop in revenues, higher expenses as well as disappointing performance of its Market Making and Corporate segments. Register with us now for your free membership at:

http://www.activewallst.com/register/

One of Interactive Brokers Group's competitors within the Investment Brokerage - National space, The Goldman Sachs Group, Inc. (NYSE: GS), reported its fiscal Quarter ending December 2016 earnings results on January 18, 2017 before market open. AWS will be initiating a research report on Goldman Sachs in the coming days.

Today, AWS is promoting its earnings coverage on IBKR; touching on GS. Get our free coverage by signing up to:

http://www.activewallst.com/registration-3/?symbol=IBKR

http://www.activewallst.com/registration-3/?symbol=GS

Earnings Reviewed

For the three months ended December 31, 2016, Interactive Brokers' net revenues tumbled 29% to $193 million. The decline was attributed to a drop in trading gains and higher other losses, which was partially offset by higher commissions and execution fees and interest income. The number missed Wall Street's forecasts for revenue of $296.5 million. For FY16, the Company's net revenues totaled $1.40 billion compared to net revenues of $1.19 billion in FY15.

For Q4 2016, average overall daily trade volume was 1.32 million trades per day, even as compared to Q4 2015 and up 5% sequentially. Orders from cleared customers who clear and carry their positions and cash with the Company held steady at 92% of total Commission per daily average revenue trade (DART). During the reported quarter, DART increased 5% on a y-o-y basis to $4.01, offset by DARTs per account falling 12% to 394.

Interactive Brokers noted that the US dollar strengthened markedly in Q4 2016 versus other major currencies. As a result, the Company's currency basket in which it stores its equity, called GLOBAL, fell 3.4% against the dollar for the reported quarter. This resulted in a loss of $201 million which includes a loss of $153 million reported in other income and a loss of $48 million in other comprehensive income. Interactive Brokers estimated the total impact to earnings per share from GLOBAL to be a loss of $0.35 for Q4 2016.

For Q4 2016, Interactive Brokers' comprehensive net loss available to common shareholders amounted to $3 million, or $0.05 per share, against net income of $12 million, or $0.18 per share, in Q4 2015. The Company posted adjusted earnings of $0.07 per share for the reported quarter, down 72% from the year ago number of $0.25 per share and lagged behind analysts' forecasts of adjusted earnings of $0.32 per share.

For FY16, reported diluted earnings per share on a comprehensive basis were $1.19 compared to diluted earnings per share on a comprehensive basis of $0.62 for FY15. Excluding other comprehensive income, the Company reported diluted earnings per share of $1.25 for the year ended December 31, 2016, compared to diluted earnings per share of $0.78 for FY15.

Segment Results

During Q4 2016, the Company's Electronic Brokerage segment's revenue grew 34% on a y-o-y basis to $294 million. The segment's pre-tax income also advanced 49% to $168 million. Total DARTs for cleared and execution-only customers were relatively stable at 640,000. Pre-tax profit margin improved to 57% in the reported quarter from 52% in Q4 2015.

For FY16, Electronic Brokerage segment's pre-tax income increased 41%, to $756 million compared to 2015. Net revenues increased 13% to $1.24 billion. For FY16, customer accounts grew 16% to 385, 000 and customer equity increased 27% over FY15 to $85.5 billion. Total DARTs for cleared and execution-only customers increased 2% to 660,000 compared to FY15. Cleared DARTs were 609,000, 3% higher than in FY15.

Market Making

For Q4 2016, Interactive Brokers' Market Making segment revenue slumped 35% on a y-o-y basis to $45 million, while pre-tax income plunged 56% to $12 million. This resulted in a pre-tax margin declined to 27% from Q4 2015 level of 39%.

For FY16, Market Making segment pre-tax income decreased 66% to $44 million compared to 2015, due to lower trading volumes and decreases in volatility and in the actual-to-implied volatility ratio. Pre-tax profit margin decreased to 23% in FY16 from 44% in 2015.

Balance Sheet

The Interactive Brokers Group, Inc.'s Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on March 14, 2017 to shareholders of record as of March 01, 2017. As of December 31, 2016, the Company maintained over $4 billion in excess regulatory capital in its broker dealer companies around the world, of which about 78% is in the brokerage segment. Interactive Brokers does not have long-term debt and its consolidated equity capital December 31, 2016, was $5.8 billion, of which approximately $4.1 billion was held in brokerage, $1.5 billion in market-making, and the remainder in the corporate segment.

Stock Performance

On January 18, 2017, Interactive Brokers' share price finished yesterday's trading session at $37.11, sliding 2.39%. A total volume of 1.26 million shares exchanged hands, which was higher than the 3 months' average volume of 458.66 thousand shares. The stock has advanced 0.04% and 12.03% in the last six months and past twelve months, respectively. Furthermore, since the start of the year, shares of the Company have gained 1.64%. The stock is trading at a PE ratio of 25.33 and has a dividend yield of 1.08%.

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