• Accounts Added: 775,000 accounts in 2024, with 217,000 in Q4.
• Client Equity: Up 33% to $568 billion, an increase of $142 billion from last year.
• Quarterly Pretax Income: Over $1 billion, a record high.
• GAAP Pretax Margin: 75% for the quarter.
• Full Year Net Revenues: Over $5 billion.
• Full Year Pretax Margin: 71%, highest in the brokerage industry.
• Commission Revenues: $477 million for the quarter; $1.7 billion for the year, up 25% from last year.
• Net Interest Income: $807 million for the quarter; $3.1 billion for the year.
• Other Fees and Services: $81 million for the quarter; $280 million for the year, up 47% and 42% respectively.
• Other Income: $59 million gain for the quarter; $132 million for the year.
• Execution, Clearing, and Distribution Costs: $115 million for the quarter; $447 million for the year.
• Compensation and Benefits Expense: $138 million for the quarter.
• General and Administrative Expenses: $59 million for the quarter; $314 million for the year.
• Total Assets: $150 billion, up 17% from last year.
• Firm Equity: $16.6 billion, up 18%.
• Options Contract Volumes: Up 32% for the quarter and full year.
• Futures Contract Volumes: Down 3% for the quarter; up 4% for the full year.
• Stock Share Volumes: Up 65% for the quarter; up 22% for the full year.
• Total Customer DARTs: 3.1 million trades per day, up 61% from the prior year.
• Net Interest Margin: $807 million for the quarter, up 11% from the prior year.

• Warning! GuruFocus has detected 6 Warning Signs with IBKR.

Release Date: January 21, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Interactive Brokers Group Inc (NASDAQ:IBKR) added a record 775,000 accounts in 2024, with 217,000 in the fourth quarter alone.
• Client equity increased by 33% to $568 billion, marking the first time the company finished the year with over $0.5 trillion.
• Quarterly pretax income reached a record over $1 billion, with a GAAP pretax margin of 75% for the quarter.
• The company introduced multiple new products and enhancements, including a generative AI-powered commentary builder and expanded trading hours for various asset classes.
• IBKR's international expansion efforts included translating account applications into more languages and launching trading on new exchanges like the Saudi Exchange.

Negative Points

• Execution, clearing, and distribution costs increased due to higher trade volumes, although commissions rose faster than these costs.
• The company faced a one-time litigation expense in the third quarter, impacting G&A expenses.
• Securities lending net interest did not appear as strong as in prior years due to fewer hard-to-borrow names and lower IPO and M&A activity.
• Interest on customer credit balances rose, impacting net interest income despite higher balances from new account growth.
• The company remains cautious about the prediction markets and is proceeding slowly to avoid potential pitfalls.

Q & A Highlights

Q: How should we think about execution, clearing, and distribution fees heading into Q1, given their slower growth compared to DARTs and commissions? A: Paul Brody, CFO, explained that these fees are generally driven by volume and include variable costs per share or contract. Rebates from liquidity-enhancing orders can affect these fees, as they are passed through to customers, reducing commission revenue. Therefore, looking only at the expense side doesn't provide the full picture.

Q: With equity build almost at $17 billion, how fast should we expect this capital balance to grow, and how does it impact hedge fund prime marketing efforts? A: Milan Galik, CEO, stated there are no plans for share repurchases, but they may consider increasing dividends if the stock price remains high. The strong capital base helps compete with large banks and signals to the market that they are a serious player, which is beneficial for institutional clients and funding margin loans outside the U.S.

Q: What are your thoughts on account growth for 2025, given the momentum seen in 2024? A: Milan Galik, CEO, expects steady growth in account numbers, driven by increased marketing spend and market enthusiasm. The change in administration, perceived as pro-business, is also contributing to new account openings as investors become more active.

Q: Could deregulation of bulge prime brokers present a threat to your high-touch prime brokerage offering? A: Milan Galik, CEO, does not expect deregulation to impact their business significantly. Competing with established banks like Goldman Sachs and Morgan Stanley is challenging, but they are focusing on improving their white glove service for hedge funds, which has been well-received.

Q: How should we think about margin balances going forward, given their solid growth despite market volatility? A: Milan Galik, CEO, noted that margin balances are increasing due to clients' risk appetite and assertive positions in derivatives. While there is some correlation with stock market trends, the current environment suggests margin balances will be maintained or slightly increase.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.