By Andrew Welsch

A surge in fourth-quarter trading volumes and investor activity lifted profits at Interactive Brokers, which reported quarterly earnings on Tuesday that topped Wall Street estimates.

The brokerage firm reported fourth-quarter earnings of $1.99 per share. Wall Street analysts had expected earnings of $1.84, according to FactSet. For the fourth quarter of 2023, the brokerage firm reported earnings of $1.48.

Revenue came in at $1.39 million, beating Wall Street estimates of $1.36 billion, according to FactSet.

Shares of Interactive Brokers rose 3.1% in after hours trading on Tuesday. The stock is up 9.3% so far this year compared with a 2.8% gain for the S&P 500.

Founded in 1977, Interactive Brokers serves individual investors and institutional customers, including hedge funds and financial advisors. The company benefited from a fourth-quarter surge in equity markets as investors bought up stocks after the presidential election on expectations of a more business-friendly administration. Though investors have been more cautious as they weigh the implications of President Trump's range of policies, Interactive Brokers' data reflect the quarter's Trump bump.

Commission revenue increased 37% year over year to $477 million on higher customer trading volumes, the company said. Customer trading volume in options and stocks increased 32% and 65%, respectively. Net interest income rose 11% to $807 million thanks in part to customers trading more on margin. And customer accounts increased 30% to 3.34 million.

Other brokerage firms and wealth management companies have also experienced big jumps in trading activity since the election. Morgan Stanley CFO Sharon Yeshaya said last week that the number of active traders on E*Trade surpassed levels last seen in 2022. And Charles Schwab reported large increases in net new assets and new brokerage accounts for the quarter: 1.1 million and $115 billion, respectively.

Stiff competition. Brokerage and wealth management firms have been competing aggressively for customers. Interactive Brokers has been introducing new features and upgrades for its customers. Last summer, the Greenwich, Conn.-based company began offering customers trading in forecast contracts, which are event-based contracts traded on a CFTC-registered exchange that Interactive Brokers established. The contracts essentially allow investors to bet on the outcome of an event, and they've proven popular. More than 1 million contracts were traded just days after Interactive Brokers launched a forecast contract for the U.S. presidential election.

In December, Interactive Brokers said it was enhancing its web-based platform for financial advisors, updating the trading and portfolio management tools. That same month, the company said it was upgrading its desktop trading platform for retail investors. The moves come as rival brokerage firm Robinhood announced a new desktop trading platform for active traders in October and an acquisition of custodian TradePMR in November.

Write to Andrew Welsch at andrew.welsch@barrons.com

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January 21, 2025 17:03 ET (22:03 GMT)

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