The online brokers have all reported second quarter earnings for 2016. At the end of each quarter, StockBrokers.com examines the earnings reports from all four publicly-traded brokers. The first quarter was a good one for the online brokers. Were they able to continue the momentum in the second quarter? We’ll take a look at fast facts and an overall look at each company’s results. We will then close by summarizing what these reports mean for the online brokerage sector as a whole. Here is a look at the results from TD Ameritrade (AMTD), Charles Schwab (SCHW), Interactive Brokers (IBKR), and E*TRADE (ETFC).
Before taking a look at each individual report, let’s take a look at how the brokerages did on an earnings per share basis compared to the second quarter in 2015. TD Ameritrade earnings rose from 36 cents a year ago to 39 cents this year. Charles Schwab brought in 30 cents per share compared to 25 cents per share in the same period a year ago. Interactive Brokers saw their earnings drop from 44 cents per share last year to 36 cents per share this year in the second quarter. E*TRADE reported 99 cents per share last year, but without a one-time tax benefit their earnings in the second quarter last year were 25 cents per share. This year E*TRADE reported 49 cents per share.
TD Ameritrade Second Quarter Earnings Fast Facts
TD Ameritrade reported 45 cents per share in the quarter, but six cents per share was from a tax adjustment
Daily Average Revenue Trades (DARTs) were 462,000, which is a little more than six percent higher than 2015
Record client assets of $736 billion
Net new client assets were up 16 percent year over year
TD Ameritrade bested analysts estimates on both the top and bottom line in the quarter. Revenue came in at $838 million compared to estimates of just $830 million. TD Ameritrade also beat by a penny on the bottom line. Investment product fee revenue was up 13 percent to a record level of $96 million in the second quarter. Pre-tax income was 40 percent of net revenues. Net new client assets rose were $14 million in the quarter. TD Ameritrade continues to show the ability to bring in new assets at an impressive pace.
Charles Schwab Second Quarter Earnings Fast Facts
Second Quarter profit rose 28 percent from last year
Schwab matched analysts estimates on the bottom line
DARTs were 279,000 in the quarter, which is up slightly from last year’s 267,000 in the same quarter
Core net new assets increased by $26.6 billion
Schwab outpaced revenue estimates by bringing in $1.83 billion versus expectations of $1.8 billion. Schwab’s pre-tax profit margin in the quarter was 39.4 percent. That’s a really strong number, and it was Schwab’s highest profit margin since 2008. The number of brokerage accounts increased by 271,000 in the quarter. Schwab now has 10.0 million brokerage accounts. Asset management and administration fees were a record $757 million, up 13 percent year over year. Trading revenue did dip one percent from the same quarter last year.
Interactive Brokers Second Quarter Earnings Fast Facts
Income before taxes dipped 11.3 percent from a year ago
The market making segment made just $5 million in the quarter, down by 83 percent from last year
DARTs were up five percent from a year ago to 648,000
Customer accounts grew 15 percent to 357,000
Interactive Brokers beat analyst estimates by a penny on the bottom line, but they did miss expectations by $4 million on the top line. Interactive Brokers reported an 11 percent increase in net interest income, or margin on trading, and a 56 percent increase in other income. This was driven by marked-to-market gains on the investments of customer funds. Commission and execution fees dipped by three percent from last year. Overall, the results in the electronic brokerage segment of the business appear strong. It was the market making segment that really hurt in the second quarter.
E*TRADE Second Quarter Earnings Fast Facts
Analysts expected only 38 cents per share and E*TRADE brought in 48 cents
DARTs were up two percent from last year to 152,000
Net income increased 13 percent from last year
E*TRADE ended the quarter with 3.3 million brokerage accounts
E*TRADE easily beat analysts estimates on the bottom line. The online broker also beat top line estimates by $3 million ($474 million vs. $471 million). E*TRADE customers added $1.6 billion in net new brokerage assets in the quarter. The company added 23,000 new brokerage accounts in the second quarter. The online broker was also helped by lower expenses in the quarter, largely due to reduced advertising and market development spending. The quarter on the whole was a very strong. The one clear negative from the quarter was total customer assets actually fell five percent from a year ago.
The first quarter was very strong, and while the second quarter wasn’t a bad one, it wasn’t as good overall for the sector. There will still more positive signs than negative ones, but results were more mixed than they were a quarter ago. It is important to note that the Brexit vote gave all of these brokers a much needed boost in trading activity right at the end of the second quarter. Without that extra boost, these results would have looked different. We are now in the summer slowdown period and it will be interesting to see how the online brokers can do in the third quarter since the current climate hasn’t been very volatile. Asset growth continues to be fairly strong, which is a good long-term sign for the industry. StockBrokers.com will be back with a report on earnings for the third quarter of 2016 in three months.
Below is a yearly chart of all four of the online brokers. The charts are through the end of the trading day on July 25.