Bearish stock to watch: Interactive Brokers Group, Inc. (NASDAQ: IBKR)

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Interactive Brokers Group, Inc. (NASDAQ: IBKR) stock fell over 0.3% on 21st July, 2020 after hours post its second quarter of 2020 update. The firm’s overall average cleared commission per commissionable order fell 24% to $2.81 during the quarter against pcp. Net interest margin also fell to 0.99% as compared to 1.66% in prior corresponding quarter of last year. With the average effective Fed funds rate, significantly falling the firm paid on the customer credit balances, while reduced earnings on segregated cash and margin loan. The yield curve was flat while the firm recorded a mark-to-market loss of $13 million on their holdings of U.S. Treasuries. Margin lending and securities lending were the largest contributors to the net interest margin. Average margin loan balances fell 13% on a yoy basis while margin loan interest income fell 65%. volumes in all product categories. The firm’s Other income, which include gains and losses on their investments and currency strategy as well as principal transaction also fell to $27 million during the quarter as compared to $59 million loss last year. Ex-non-core items, other income fell 31% to $11 million. The Fixed expenses rose 97% yoy to $238 million, on the back of the unusual WTI event. Fixed expenses rose 12% yoy to $135 million, on the back of rising compensation and benefits.

On the other hand, the Securities lending interest income performed well rising 67% on a yoy basis and reported a 66% rise in segregated cash balances. Net revenues rose 31% to $539 million during the second quarter of 2020 as compared to the same period last year. Excluding non-core items, net revenue rose 7% to $523 million during the quarter while Commission revenue surged 55% yoy.  Accounts rose 36% year-on-year to $876,000, as the firm brought on more new accounts than they have added in a full year. This quarter’s growth implies an annualized account growth rate of 60%. Client equity rows above $200 billion for the first time and ended the quarter up 33% at $203 billion. Clients traded more actively with total DARTs to over 1.7 million, more than doubling from last year, and cleared average DARTs per account was 64% to 480.

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