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Interactive Brokers Group Announces 2012 Results

Stocks in this article: IBKR

Interactive Brokers Group, Inc. (NASDAQ GS: IBKR) an automated global electronic broker and market maker, today reported diluted earnings per share on a comprehensive basis of $0.92 for the year ended December 31, 2012, compared to diluted earnings per share on a comprehensive basis of $1.31 for 2011.

Reported results on a comprehensive basis reflect the GAAP convention adopted in 2011 that requires the reporting of currency translation results contained in Other Comprehensive Income as part of reportable earnings.

On a non-comprehensive basis, which excludes the effect of changes in the U.S. dollar value of the Company’s non-U.S. subsidiaries, the Company reported diluted earnings per share on net income of $0.89 for the year ended December 31, 2012, compared to diluted earnings per share on net income of $1.37 for 2011.

Net revenues were $1,131 million and income before income taxes was $527 million for the year, compared to net revenues of $1,358 million and income before income taxes of $741 million for 2011.

The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on March 14, 2013 to shareholders of record as of March 1, 2013.

Business Highlights

  • 47% pretax profit margin for 2012.
  • 51% Electronic Brokerage pretax profit margin for 2012.
  • 41% Market Making pretax profit margin for 2012.
  • Customer equity grew 31% from 2011 to $32.9 billion and customer accounts increased 11%.
  • Cleared DARTs decreased 6% from 2011 to 384,000.

Segment Overview

Electronic Brokerage

Electronic Brokerage segment income before income taxes decreased 8%, to $342 million, in 2012. Customer accounts grew 11% from the prior year and customer equity increased 31% during 2012. Commissions and execution fees decreased 10%, consistent with the subdued trading environment. Net interest income grew 9% from the prior year. Pretax profit margin was 51% in 2012, down from 54% in 2011. Total DARTs (1) for cleared and execution-only customers decreased 7% to 413,000 in 2012, compared to 444,000 during 2011. Cleared DARTs were 384,000 in 2012, 6% lower than in 2011.

Market Making

Market Making segment income before income taxes decreased 54%, to $189 million, in 2012. This decrease was driven by lower exchange volumes, lower actual-to-implied volatility and a swing in currency translation gains. In 2012, our currency diversification strategy negatively impacted the income statement by $39 million, compared to an $11 million gain in 2011. Including balance sheet effects, our currency strategy resulted in a slightly smaller loss than last year. Currency translation effects are reported as part of Trading Gains in the Market Making segment. Pretax profit margin decreased to 41% in 2012 from 59% in 2011. Market Making options contract volume decreased 9% in 2012.

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