Interactive Brokers Group, Inc. (NASDAQ:IBKR) Q4 2014 Earnings Conference Call - Preliminary Transcript

Jan 20, 2015 • 04:30 pm ET


Interactive Brokers Group, Inc. (NASDAQ:IBKR) Q4 2014 Earnings Conference Call - Preliminary Transcript


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Good day, ladies and gentlemen everyone and welcome to the Interactive Brokers Group Inc. 2014 Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today's program maybe recorded.

I would like to introduce your host for today's program Deborah Belevan, Director of Investor Relations. Please go ahead.

Deborah Belevan

Thank you, operator, and welcome, everyone. Hopefully by now you've seen our 2014 earnings release, which was released today after market closed, and which is also available on our website. Our speakers today are Thomas Peterffy, our Chairman and CEO; Paul Brody, our Group CFO. They're going to start the call with some prepared remarks about the quarter and then we're going to take questions.

Call may include forward-looking statements which represent the Company's belief regarding future events and by their nature are not certain and outside the Company's control. Our actual results and financial condition may differ possibly materially from what is indicated in these forward-looking statements. We just ask that you refer to disclaimers in our press release and you should also review a description of the risk factors contained in our financial reports filed with the SEC.

I'd now like to turn the call over to Thomas Peterffy.

Thomas Peterffy

Hi, good evening everyone, and thanks for joining us to review our fourth quarter performance. Our pretax earnings of $74 million for the quarter and $506 million for the year, as reported in US dollars, were seriously impacted by the rising dollar against most major currencies represented in the global. Without that impact these earnings would have been $180 million and $692 million respectively.

Brokerage income makes up $589 million or 85% of this total.

As usual we have set new records in our brokerage business both for the quarter and for the year. And the new year was taking off with even better numbers until last Thursday when it all exploded in our faces.

The forex markets were shaken by the shocking and unprecedented action of the Swiss National Bank which left many investors and companies devastated by the move, including a handful of our own customers that held large currency futures and forex positions. These customers' suffered losses in excess of their deposits with us to the tune of about $120 million, which amounts to 2.3% of our total equity capital. Normally our automated risk controls would liquidate client positions to prevent such losses, but in this case the move was instantaneous and we were unable to liquidate. We do have full recourse to recover these losses but that will take time. The largest five losing accounts amount to about 80% of the losses and none of them are US entities. I will point out that this development presents an opportunity for us to attract displaced or shaken customers that realize the importance of being with a well-capitalized broker so we would expect this to contribute to