S&P Global Ratings have revised the outlook of IBG LLC as well as its subsidiary, Interactive Brokers LLC, on Monday, changing it from positive to stable. Even so, the firms have managed to retain its “BBB” issuer credit rating on IBG LLC, as well as its “BBB+” long-term and “A-2” short-term issuer credit ratings for Interactive Brokers LLC.
Coronavirus Causes Uncertainty
S&P gave the reasoning for this change from positive to stable, stating that it reflects the overall uncertainty regarding the length and severity of COVID-19 pandemic. Notably, the economic and market stress it raises for potential losses. This stress has the potential to ruin things enough that S&P sees it unlikely to raise the ratings on IBG until the COVID-19 pandemic has eventually receded. Furthermore, S&P made it clear that the group considered IBG still highly capitalized and profitable.
S&P was quick to point out that the brokerage of the firm has acted as a leader when it comes to daily average revenue trades. S&P further noted that it is smaller than its main retail peers to a substantial degree when one looks at its total client assets. IBG had recorded total client assets of $179,8 billion, having been recorded on the 30th of April, 2020.
Full Expectation Of Profitable Venture
S&P holds the expectation that the firm will maintain a RAC ratio of well and above 25%, as well as a liquidity coverage metric above 90%, as well as a gross stable funding ratio that stands over 110%. As such, S&P reiterated its expectation that IBG will still maintain a very strong sense of capitalization, as well as supportive liquidity and profitability. This comes from S&P’s latest economic and market stress assumptions caused by the COVID-19 pandemic.
Interactive Brokers Group has not come out of this unscathed, however. The Group had posted diluted earnings per share for Q1 2020, clocking in at $0.60 per share. This is down from the $0.64 that it registered in Q1 2019. The adjusted diluted earnings per share for this quarter has been reported at $0.69 for this quarter, standing against Q1 2019’s numbers of $0.55.
Crunching The Quarter Numbers
Q1 2020’s net revenue for IBG has been attributed to $532 million, with the income before taxes being attributed to $308 million. This stands just under the numbers of Q1 2019, which totals at $558 million in net revenues, as well as $339 million in regards to income before income tax.
The commission revenue has increased; however, by a considerable 55% when one views it year-over-year. This leads to a total of $96 million in commission revenue and has been attributed to the higher levels of customer trading volume. This higher volume is, in turn, spawned from an increased market volatility environment that the COVID-19 pandemic had created.