Zacks_Analysts' Blog : Interactive's August Metrics Up - Analyst Blog

Last week, Interactive Brokers Group Inc.’s (IBKR) Electronic Brokerage segment announced improved monthly brokerage data for August. The segment under review clears and settles trades globally for both individual and institutional clients.

Total customer accounts for the month of August were 181,500, up 2% from 177,700 in July 2011 and 22% from 148,700 in August 2010. Similarly, the total customer Daily Average Revenue Trades (DARTs) spiked 32% from the prior month and 58% from the prior-year month to 550,000.

Furthermore, during the reported month, Interactive recorded Cleared Customer DARTs of 507,000 compared with 383,000 in July 2011 and 315,000 in August 2010. On an annualized basis, the company reported Cleared Average DART per customer account of 512,000, up from 546,000 in the previous month and 536,000 in the comparable month last year.

Interactive’s total options contracts surged 57% from the prior month and 92% from the year-ago month to 34,646 in August 2011. Also, the company’s futures contracts rose to 10,975 in the month under review from 7,148 in the prior month and 6,659 in the year-ago period.

Interactive also provided period-end statistics for customer equity, customer credit balances, and customer margin loan balances. For the period ended August 2011, customer equity stood at $25.3 billion, down 3% from July 2011-end but up 46% from August 2010-end.

Additionally, Interactive’s Electronic Brokerage segment recorded customer credit balances of $16.7 billion at August 2011-end, down from $17.0 billion at July 2011-end, but up from $12.0 billion at August 2010-end. Similarly, customer margin loan balances of $7.4 billion in the reported month reflected a 16% drop from $8.8 billion recorded at July 2011-end but a 61% hike from $4.6 billion registered at August 2010-end.

Though Interactive’s fundamentals remain strong with a liquid balance sheet, sturdy capital base and high barriers to entry, we remain concerned about the Market Making segment’s ability to consistently generate sufficient returns to fund dividend payment. Also, there are concerns looming over Interactive’s dependence on IBG LLC and its wide international exposure.

Interactive currently retains a Zacks #2 Rank (a short-term ‘Buy’ rating). However, one of its competitors, Knight Capital Group Inc. (KCG) retains a Zacks # 3 Rank (a short-term ‘Hold’ rating).