Interactive Brokers Group, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing; it does not provide a clear standalone fourth-quarter results summary.
Business context
Interactive Brokers is a global electronic broker providing execution, clearing, custody, financing and related services to institutional and individual customers. It offered access to more than 150 exchanges and market centers in 34 countries. At year-end, it reported 2.56 million customer accounts, customer equity of $426.0 billion and 2,932 employees. IBG, Inc. owned approximately 25.4% of IBG LLC; Holdings owned 74.6%.
Financial results
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Total net revenues | $4.340 billion | $3.067 billion | +42% |
| Net interest income | $2.794 billion | $1.668 billion | +68% |
| Commissions | $1.360 billion | $1.322 billion | +3% |
| Non-interest expenses | $1.271 billion | $1.069 billion | +19% |
| Income before income taxes | $3.069 billion | $1.998 billion | +54% |
| Net income | $2.812 billion | $1.842 billion | +53% |
| Net income available to common stockholders | $600 million | $380 million | +58% |
| Diluted EPS | $5.67 | $3.75 | +51% |
Pretax margin rose to 71% from 65%; net interest margin increased to 2.36% from 1.53%. Adjusted diluted EPS, a non-GAAP measure, was $5.75 versus $4.05. Operating cash flow was $4.544 billion versus $3.968 billion. Cash, cash equivalents and restricted cash totaled $32.593 billion at year-end, up $3.990 billion during 2023.
Total assets were $128.4 billion and total equity was $14.1 billion at year-end. The company said 99% of assets were considered liquid, but much of its balance sheet relates to customer funds and collateralized brokerage activity. Short-term borrowings were $17 million; no senior notes were outstanding. Excess regulatory capital across operating subsidiaries was $10.225 billion, and all were in compliance with their requirements.
Changes versus 2022
- Higher benchmark rates and larger average customer credit balances drove the increase in net interest income; the average federal funds effective rate was about 5.0%, versus 1.68% in 2022.
- Customer options and futures volumes increased 12% and 1%, respectively, while stock share volume fell 24%; total customer DARTs declined 9%.
- Accounts increased 23% and customer equity increased 39%, while average commission per cleared commissionable order rose 11% to $3.14.
- Expenses increased, including compensation and benefits (+16%) and execution, clearing and distribution fees (+19%). General and administrative expense rose 28%, primarily reflecting a regulatory settlement.
Outlook, risks and unusual items
The filing gives no specific quantitative revenue or earnings guidance. Management identifies trading activity, volatility, interest rates, competition and regulation as important, uncertain drivers. It notes that lower benchmark rates could reduce net interest income; a 0.25 percentage-point change in U.S. rates was estimated to change annualized net interest income by approximately $56 million, with a 0.25-point change in relevant non-U.S. rates estimated to change it by $18 million to $20 million.
- Regulatory settlement: In September 2023, subsidiaries agreed to pay $35 million to the SEC and $20 million to the CFTC over business communications on unapproved electronic messaging channels and records-preservation requirements. The company also agreed to cease and desist and engage an independent compliance consultant.
- OFAC inquiry: The company disclosed sanctions-compliance issues and voluntary self-disclosures. The investigation is ongoing; the timing and amount of any penalty are uncertain.
- Litigation: A class was certified in a customer margin-liquidation case; trial is tentatively scheduled for 2025, and the potential loss is not clearly quantifiable. A separate patent case has a $6.6 million jury award plus interest and costs; an appeal decision was pending.
- Technology and market risks: The company relies on proprietary systems and third parties, acknowledges it does not have fully redundant systems, and warns of cyber, outage, counterparty, margin-lending and market-making risks. It reported no cybersecurity risks believed to have materially affected or likely to materially affect the company during the reporting period through filing.
- Other exposures: Currency diversification increased comprehensive earnings by $42 million in 2023, versus a $211 million decrease in 2022. The company’s crypto safeguarding asset and liability were each $172 million at year-end under SAB 121; it reported no crypto loss events. The potential effects of Pillar Two minimum-tax rules are still being evaluated.
The company stated that it expects to continue quarterly dividends of $0.10 per share, subject to Board discretion. Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- How sensitive future earnings are to interest-rate changes, customer cash balances and the high contribution of net interest income.
- Whether customer trading activity and account growth can offset lower stock volumes and competition-driven pricing pressure.
- The final outcome and financial impact, if any, of the OFAC inquiry, customer class action and patent appeal.
- That reported liquidity and regulatory capital are not equivalent to unrestricted cash available to common stockholders.
- The potential effects of future share issuances tied to purchases of Holdings’ IBG LLC interests, the controlling ownership structure and Tax Receivable Agreement payments.