Interactive Brokers Group Inc (NASDAQ:IBKR) Q4 2019 Earnings Conference Call - Final Transcript

Jan 21, 2020 • 04:30 pm ET

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Interactive Brokers Group Inc (NASDAQ:IBKR) Q4 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for standing by and welcome to the Interactive Brokers Group Fourth Quarter and Full Year Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program may be recorded. And I would like to introduce your host for today's program, Nancy Stuebe, Director of Investor Relations, please go ahead.

Executive
Nancy Stuebe

Good afternoon and thank you for joining us for our year-end 2019 earnings conference call. Once again, Thomas is on the call and will handle the Q&A, but asked me to present the rest of his comments. As a reminder, today's call may include forward-looking statements, which by -- which represent the company's belief regarding future events, which by their nature are not certain and are outside of the company's control. Our actual results and financial condition may differ, possibly materially from what is indicated in these forward-looking statements. We ask that you refer to the disclaimers in our press release. You should also review a description of risk factors contained in our financial reports filed with the SEC.

Interactive Brokers again ended the year with record numbers with client equity up 35% [Phonetic] to over $174 billion, double that of 2016. Accounts were 690,000, up 15% and brokerage pre-tax margin was 65%. On the balance sheet side, margin loans rose to $31 billion, tying our previous record while our total equity is now over $7.9 billion. Importantly, our net revenues adjusted for our usual non-core items of currency translation and treasury portfolio marks were up 1% to $503 million in the fourth quarter despite events that people believed were likely to lead to a decrease in revenues such as lower volatility, lower interest rates and the introduction of zero commission. Despite the Federal Reserve lowering interest rates three times this year, our net interest income rose 18%. Commission revenue was $205 million, down 18%, which is to be expected in a quarter where average volatility, which has a big effect on how much our clients trade fell 33%.

There are now two ways for clients to trade at Interactive Brokers: our IBKR Pro platform offers our full capabilities and technology with best price execution and our extremely low commission and margin rates ranging from 1.85% to 3.05% based on loan size or you can use IBKR Lite, which we introduced in September, where we offer clients zero commissions and low margin rates, currently 4.05%, but we let them know that we will route their orders to high frequency traders in return for payment. So far, we have about 5,600 Lite customers, 3,600 of whom switched from Pro and about 10% have chosen to switch from Lite to Pro in the less than three months since the introduction of Lite. Because we tend to have a more sophisticated client base that is well aware of the benefits to performance of best price execution on orders, they have