Q1 2021 Interactive Brokers Group Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the interactive brokers group first quarter financial results Conference call.
At this time, all participants on a listen only mode. After the Speakers' presentation. There would be of question and answer session to ask the question. During the session you would eat the press Star then one on your telephone.
Please be advised that today's conference is being recorded if you require any further assistance. Please press Star then zero I would now like the hand the conference over to you speak of what today, Nancy Stuebe, Inc.
Correct.
Since you may begin.
Thank you operator, and thank you everyone for joining us for our first quarter 2021 earnings conference call.
Once again Thomas is on the call, but asked me to present the comments on the business he will handle the Q&A.
As a reminder, today's call may include forward looking statements, which represent the company's belief regarding future events, which by their nature are not certain and are outside of the company's control.
Our actual results and financial condition may differ possibly materially from what is indicated in these forward looking statements.
I ask that you refer to the disclaimers in our press release.
And also review the description of risk factors contained in our financial reports filed with the SEC.
Okay.
Q1 was and absolutely spectacular quarter.
I've never seen anything like this and over 50 years on Wall Street.
And those are Thomas is here, it's not my years, well, we have had some other very active quarters and the past there were two unique features about this one.
First that it seemingly happened in parallel and and tandem across all geographies around the globe and second that the feverish activity appeared to be led and much more by individual investors and by institutions.
You can explain all of this by the combination of both the slowly spreading electronic connectedness of individuals' to each other and to institutions and businesses, including the financial markets as well as by the sudden worldwide spread of the virus.
The activity started to rise slowly along with the advancement of the virus and March 2020 picking up speed towards the end of the year.
It reached its crescendo towards the end of February and has been subsiding sense.
Where will we end up.
I think the impact of the virus will disappear, but the resulting increasing reliance by the public and electronic communications on working and meeting from a distance and on gathering and larger asynchronous groups, including groups of investors will remain.
As for interactive brokers I would expect that the sudden growth spurt will soon be over and we will return to our historic account growth rate and the high twenties percentage, but now from a substantially higher base.
And that is the only if of our many new tools products of ideas that we continuously develop and add to the platform none really hit the jackpot.
If they do will grow faster.
Just kidding, we do not realize that any one particular feature of aspect of our platform will hit the jackpot.
But what we do expect is that as we become better at enabling our customers to navigate through our numerous high quality features and ever greater efficiency and as we establish individualized work environments and tools for them the superior customer experience will become ever better known and spread by word of mouth.
And now to go over these outsized numbers.
We ended the quarter with a record 1.325 million accounts and net increase of over 565000 from March 2020 are 74%.
We saw account growth and all client segments, and all geographic regions and.
In fact accounts grew nearly equally and the three geographic regions, we serve the Americas Europe and Asia.
Client equity more than doubled to a quarter and record of 330 billion.
As our customer base grew darts and darts per account rose as well.
Total darts for the first quarter were $3 3 million up 128% over last year and 57% over the fourth quarter.
All of Darts per account rose to 622, the highest and nearly 10 years.
While our business is strong even with moderate volatility the highly automated nature of our platform and our low cost structure mean that higher trading activity since a greater proportion of revenues to our bottom line.
This quarter, our pretax margins were strong at 72% adjust.
Adjusted for noncore items of pretax margin reached 68% up from 61% of year ago.
In addition, our capital base has grown even stronger during this period with total equity reaching $9.4 billion this quarter.
The space has helped us to attract larger customers as well as reassure the increasing number of clients looking to participate and the markets.
We saw growth, including record growth and some segments and all five of the client types that we service.
I will now go over our five client segments.
Individual customers, who made up 62% of our accounts, 36% of our client equity and 54% of our commissions continued the run of record growth. This quarter with 12 month account growth more than doubling to 107% and even higher client equity growth of 109% while commissions grew 66%.
<unk>.
This includes the roughly 57000 less active accounts, we took over from Goldman's fully go purchase.
In addition to the eight from mentioned factors.
Continued active interest and the markets by investors worldwide increases and market indices and investor desire to improve on the zero interest rate environment alternatives or some of the reasons behind the strength.
All geographic areas, we serve saw triple digit growth and individuals with close to uniform growth rates across the Americas, Europe and Asia.
This proves the importance of providing a reliable platform to a global audience offering wide product choices and worldwide access and demonstrates the clients want the maximum opportunities to invest and the variety of ways. They prefer.
We continue to see growth of the hedge fund customer segment for the 12 months ended March 31, we saw 3% hedge fund of count growth, 69% customer equity growth and 12% Commission growth.
Strong customer equity growth, well outpaced industry asset growth of under 10%.
We continue to benefit from our reputation for best price execution, low and transparent margin and securities financing rates and the quality of our platform and the strength of our balance sheet, and we keep inching up and frequency of ranking of prime broker custodians.
Hedge funds represent 1% of our accounts, 7% of our client equity and 6% of our commissions.
Proprietary trading firms are 2% of our accounts, 9% of client equity and 13% of commissions.
For the quarter. This group grew by 35% and accounts for the 12 months period, 57% and client equity and 31% and commissions.
Prop trading firms are sensitive to the direction of volatility and trade more as volatility increases.
<unk> strong volatility led to more active trading strategies, while accounts and client equity grew due to more traders wanting to be on our platform to capitalize on its reputation for seamlessness and efficient trade executions.
Financial advisors are 10% of our accounts, 16% of our customer equity and 11% of our commissions.
This group grew accounts by 21% for the 12 month period customer equity by 66% and commissions by 11%.
Accounts and client equity growth show, our increasing penetration of the segment.
Commissions were up by less and account and equity growth as advisers typically tend to trade more conservatively.
Our independent advisor business of small relative to fidelity of Schwab, but while these firms emphasize the advisor and individual segments. Only we also cater to hedge funds and prop traders who are of more demand and group as far as certain functionality is concerned.
We built infrastructure for each client segment and make it available to all as a result, our platform has the richest set of tools and capabilities and with the strategy, we get better and grow faster and each of our customer segments and our peers.
As published reports indicate when our A's are asked to rank nine brokers Schwab and Fidelity Morgan Stanley Bank of America L. P O Edward Jones Stifel, Raymond James and interactive brokers, our R. A offering ranks third of the nine among most liked and seventh of the nine among most disliked.
Even more promising we were also the most improved from year to year among all.
Large advisers would work best by using three custodians and giving us the most active and most leveraged accounts due to our superior execution and margin rates.
Our final segment is introducing brokers.
These represent 26% of our accounts, 32% of our client equity and 16% of our commissions.
I brokers segment account growth was 48% for the latest 12 months, while client equity more than doubled growing 169% and commissions by 165%.
Interactive brokers platform provides the global trading and seamless back off of functionality critical for brokers, who want to provide of global offerings. So they can capture clients worldwide.
Seek to invest and want to be able to access many markets in order to do so.
We are excited about the opportunities for 2020 one we.
We have placed enhanced focus on our marketing efforts and we have continued to increase spending in this area over the past year and continue and expect to continue to do so this year.
We are coming out and the current quarter with several new exciting tools and products. It is the endless procession of new interactive brokers products and services that is the foundation of our rapid growth and.
In this regard quality truly outshines quantity.
More and more online brokers pop up every day all over the world. They all of her trading tools trade executions and custody and each has some angle that is their specialty.
But how are they going to compete with the established brokers platforms that have been evolving for many years, they will not be able to.
It is the platforms with the best al and prices and highest quality of tools and services that will ultimately attract those users who seriously search for what suits them the best.
This is our moat and.
And we will continue to widen it this year and onwards.
With that I will turn the call over to our CFO, Paul Brody, who will go through the numbers for the quarter.
Thank you Nancy Thanks, everybody for joining the call as usual I'll start.
Reviewing our first quarter operating results and the non core items.
The main factors that drove that the numbers and then we'll open it up for questions.
Beginning with the operating data record levels of the count openings and trading drove strong operating metrics.
Hi, global market participation in the face of zero to negative interest rates.
While market volatility came down a bit.
Industry volumes, especially in stocks and options continued their upward March.
And trading by our active trader customer base surpassed even the industry's brisk increases.
Volatility as measured by the average of VIX.
Well from the unusually high levels of last year at the outset of the coronavirus pandemic at the time of.
Great uncertainty the average.
<unk> fell from 31, and the first quarter last year to 23 this quarter consistent with the mid Twenty's levels seen in the second half of 2020.
Continued global interest and financial markets amid the search for higher yields and led to higher industry trading volumes and most product.
Compared to the first quarter of 2020.
Our quarterly total darts and more than doubled.
128% to a record $3 3 million.
Our customer trade volumes rose dramatically and several product classes.
The increases of 72% and 411% and options and stock volumes respectively.
The stock volume was inflated by trading and low price stocks, though even after removing that effect of the share volume.
<unk> hundred 34%.
Futures volumes declined 17% due.
Due to this quarter's comparison to the extremely active futures volume of March 2020.
But this quarter still ranked fifth highest.
FX dollar volumes this quarter were lower as investors turn their focus to equity markets.
Total accounts reached a record of 1 million 300 and.
And up 74% over the prior year contributing to customer equity more than doubling from the first quarter of 2020 to 336 billion.
Our overall average cleared commission per commissions of order fell 30% versus last year to $2.31.
On a product mix.
Third smaller average trade sizes and options futures and Forex.
Another factor contributing to this decline was our continued success and capturing liquidity rebate, some or all of which are passed through to our clients.
These rebates reduce the overall condition of our clients pay which decreases the average commission per dart.
But they also reduce the exchange fees, we pay on the expense side, making the overall impact neutral to our bottom line.
Moving to our net interest margin table and editors.
And just margin narrowed from 1.4 of 5% to one 6% year over year.
But not fully impacted by the.
And average U S benchmark fed funds rate.
From 125 basis points to eight basis points.
And as most rates.
And.
Zero.
In light of the flat yield curve, we kept the duration of our portfolio relatively short.
We recorded an immaterial mark to market loss on our holdings.
And for the U S treasuries.
Outside the U S benchmark interest rates remain zero or negative and nearly all currencies and central banks continue trying to soften the impact from the pandemic.
Over the past few quarters due to interest earned.
On credit balances.
Through negative rate costs on these currency.
As a reminder.
Our customer credit balances are not in use.
And so changes in rates that occur and the U S do not apply to <unk>.
All of our balance.
Securities lending and margin loan where the law.
Contributors to our net interest income.
Securities lending was particularly strong this quarter.
Utilizing our in house developed system, our team executed on the opportunities to lend hard to borrow names and investors were looking to the short.
Net interest income from securities lending and reached a record $175 million this quarter of 182% year over year.
Average margin loan balances of 47% versus last year.
More comfortable taking on risk and leverage.
Even with the decline and the fed funds effective rate to near zero.
Uh huh.
Higher year over year balances led to only of 16% decline and margin loan interest income.
From $139 million to 100 and.
And $17 million.
Lower rates also reduced our earnings on segregated cash.
Despite a 38% increase and segregated cash balances interest income fell along with benchmark rate.
Drop and yield from six basis points and the fourth quarter to two basis points of this quarter was also affected by inflows and <unk>.
Currencies with negative interest rates.
Note that for accounting purposes, our FDIC sweep program, which expanded by 11% over the prior year.
The funds that would otherwise be included and segregated cash balances on our balance sheet.
Now for our estimate of the impact of the next 25 basis point increase in rate.
And.
And calculating the impact of rate changes.
And that has the possibility of the future.
The future rate increases becomes more certain and this expectation is typically already reflected and the yields of the instruments and which we invest.
Therefore, we attempt to isolate the impact of and unexpected.
Separate from the impact of rate hikes or cuts that have already been baked into the prices of visits.
With that assumption, we would expect the next 25 basis point of unanticipated rise in rates.
And to produce and additional $105 million and net interest income over the next four quarters.
And $110 million is the.
Run rate based on our current balance sheet.
Our net interest income is highly sensitive to small rate increases due to the impact of low benchmark rates on the spread between what we earn on our segregated cash.
Of our customers.
As U S rates fell below 50 basis points.
Fred compressed as we are.
And the less on our segregated cash.
However, the converse is also true that as rates move back up towards the 50 basis points the spread right.
The $110 million run rate and includes.
And the reinvestment of all of our present holdings at the new assumed rate but.
It does not take into account any change and how we manage our segregated cash.
The 25 basis point unanticipated falling rates.
It produced the decline in net interest income of $37 million over the next four quarters and $38 million run.
Run rate.
Turning to the income statement.
We define non core items.
Not part of our fundamental operating result, noncore adjusting items versus the year ago.
Quarter.
Our currency diversification strategy lost $49 million, a year ago versus the loss of $2 million. This quarter. So a comparative increase in income of $47 million.
Investment gains and losses rose from the loss of $11 million.
Two of gain of $99 million of this quarter.
And $110 million swing.
And mark to market on the U S government securities.
And from an $11 million gain two zero this quarter.
The comparative decrease of $11 million.
The net effect of these adjustments increased pretax income by $97 million of this quarter.
<unk> shift of 146 million over last year's quarter.
Net revenues were a reported $893 million.
<unk> of 68% versus last year's first quarter.
Excluding noncore items net revenue was up 37% to $796 million.
Commission revenue rose, 53% on significantly higher volumes, particularly in it.
And our average cleared commission per commissions.
As noted earlier smaller average trade sizes and options futures and Forex as well as our continued successful capturing of the execution.
Which largely are pass back the clients contributed to this number.
Net interest income rose, 19% of $305 million.
118 basis point decline and the average effective fed funds rate versus the year ago quarter, thanks to growth and our balance sheet.
And loan balances and our.
Successful securities lending effort.
Other fees and services revenues, which include the market data exposure accounts.
<unk>.
The bank.
Sweet program, and IPO facilitation fees as well as order flow income from options exchange mandated program.
Rose, 47% the $56 million.
The top three contributors from market data fees, which were up 6 million options of order flow income, which was up 3 million and.
Facilitation fees, which were up $7 million.
Other income.
Which include the gains and losses on our investments and currency diversification strategy.
As well as principal transactions swung to a gain of $120 million from a loss of $31 million and last year's quarter.
Ex noncore items other income increased 25% to $23 million.
Noninterest expenses were $254 million of the quarter up 13% from last year.
Larger exchange liquidity of rebates drove a 12% reduction and execution clearing and distribution fees to $68 million despite the higher volume.
As mentioned.
And of these rebates are passed through to our clients and are reflected.
And.
The Commission.
Fixed expenses were $184 million up 31%.
Driven by a 21% increase and compensation and benefits in line with the hiring.
The brokerage business and.
And by the.
G&A expense.
At quarter, and our total head count stood at 2187 of 28% increase over last year.
We have been hiring aggressively and client services to support the game.
Flux of new accounts as well.
And compliance and software development.
Yeah.
This quarter G&A included $19 million related to licenses and fees required to set up operations in Europe due to Brexit.
Going forward, we will have some annual regulatory fees as we do and all countries in which we are registered but this $19 million will not be recurring.
Customer bad debt expense was $2 million well contained.
Trading period.
Reported pretax income more than doubled from last year's quarter to $639 million 40, and 72% pretax margin.
And excluding noncore items pretax income rose, 52% to $542 million.
8% pretax margin.
Diluted earnings per share were $1 16 for the quarter versus 60 from the same period and 2020.
And ex noncore items diluted earnings per share or 98 cents.
69.
Last year.
To help investors better understand our earnings taxes, and the split between public shareholders and the Noncontrolling interests.
The first quarter numbers are as follows.
Starting with our pre tax income of $639 million.
We deduct $26 million for income taxes paid.
The company share mostly foreign taxes.
Note that we had a $6 million addition to what we normally would of expenses related in part to consolidating our European operation and the.
After math of Brexit.
This leaves 613 million of which 78, 2% or that $479 million reported on our income statement.
Attributable to Noncontrolling interests.
The remaining 28 21, 8%.
$134 million is available to the public company shareholders.
This is the non-GAAP measure it is not reported on our income statement.
After we expense remaining taxes.
Public company.
Of $27 million on that 134 million and.
Net income available for common stockholders is the <unk>.
$107 million.
Reported on our income statement.
Note that the public companies tax disproportionately higher primarily because the IBD, Inc. 's ownership rose from 18, 5% to 21, 8%.
Our income tax expense of $53 million.
Of this 27 million plus the $26 million of taxes paid by the operating company.
Turning to the balance sheet was $9 4 billion and consolidated equity at March 31st 2021.
Well capitalized from a regulatory standpoint, we deploy our strong capital base towards opportunities.
Business and investing opportunities worldwide as well as the emphasizes the strength and depth of our balance sheet, the current and prospective clients and partners.
Capital is deployed across 14 registered broker dealer type of entities around the world.
The regulatory capital requirements.
The need margin lending and other financing opportunities.
<unk>.
And we continue to carry no long term debt.
With that I'll turn it over to the moderator and we will.
Take questions.
Thank you.
Ladies and gentlemen, as a reminder to ask the question do we need the press Star then one on your telephone to win.
All of your question first of the pound key.
Yeah.
On to ask the question please.
Please standby.
The Q&A roster.
Our first question comes from the line of credit.
With credit Suisse. Your line is open.
And.
Good evening, everyone and hope you're all doing well.
Yes. Thank you.
So the Thomas starting on capital management, where is the point, where you think you have enough capital and I'm, especially thinking about your hedge fund prime business, where you could start raising the dividend to a more comparable level to some of your peers.
That's the reason.
And the dividend.
As you heard from let's say we have 14.
And <unk>.
And if these broker dealers that are on the.
And the needs.
Need more capital ex you'll do that and we.
So and we also have some opportunities as far as at the Ozark and insurance needs.
And financed and such.
Kitchens so.
In the.
It's not the smell.
No not going to be a dividend increase.
You too.
Thank you Thomas.
And I just had a modeling follow up maybe for Paul but execution and clearing costs were quite low again can.
Can you talk about what was and the <unk> run rate, what we should expect from <unk> and if there's also any impact from exchange rebates.
Well, it's definitely impact from the exchange rebates as I mentioned.
But again most of that is passed through to the customers and the in the form of reduced commissions. So you'll see it come out of the expense line, but also of the revenue line.
One of the things we've been able to do over time certainly over the last year has improved.
Our software too.
Our routing software too.
Optimize.
And the routing of orders too.
To maximize the rebates that we can then pass through to our customers.
And we're constantly looking at improving all of those systems and in that regard so.
But you know to the Bottomline it might have a small impact.
But because of our passing them through our customers of the biggest impact is a better deal for the customers.
So and other things I need.
Need to add to it.
And.
Please go.
Great deal of them.
This is on trying to execute.
The match or theirs.
Because that is the.
Good day.
And we can provide the best execution.
No no that we have.
Three points.
It's a day it is it.
It is becoming a lucrative and our dog food because of lucrative place for institutional traders to try to participate and interacting with the toward the flu.
And so.
And he can get more and more institutional traders into all of the dark pool of two two.
Indicate day jumped.
The orders.
And that we can match them up.
To the flu as it's called the Dubose in.
Have you thought had been that feature and we done that.
And of course.
Thank you Thomas.
Thank you.
Our next question comes from the line of Chris Allen with Compass point.
Your line is open.
And I just wanted to follow up.
On the question of the commentary around the in the dark pool of becoming more interesting.
And I can't recall, you guys and we're talking about.
And the dark pool before maybe you can give us some metrics in terms of.
And any what volume is currently executing on the dark pool was matched up out of Europe.
Total trades right now.
It's it's approaching 30%.
Okay.
Got it.
Alright, and then.
And then switching gears, a little bit I know that you're talking about increasing your marketing efforts.
Historically of word of mouth has been and your primary catalysts to drive new account growth of.
Any color in terms of of how Youre expanding your marketing efforts.
He of new hires directly on the Mi and are you looking at different channels from a marketing perspective.
We have new hires on that.
And so yes, we are looking and got more regional marketing got on them.
This is.
And Larry.
And the initial phase into the channel.
And see it seems like you're still but we are going to go.
And I do have a more regionalized marketing the airport.
Of course, we find that people are more comfortable.
For example, and data.
The general and business et cetera.
Got it so it's fair to say, you're starting from a fairly low base in terms of your existing marketing efforts specifically on the regional growth.
That's correct.
All of the marketing expenses currently.
Absolutely.
Yeah.
Got it.
And then the last one from me before Japan and the Q.
Some recent articles.
Quoted I think it was and I'd be curious spokes, and saying that you're going to be launching crypto currency effort of.
The summer just wondering if you of any color on that and approach that market from a cost of the storage perspective, and source of liquidity et cetera, and any color would be great.
I think gets all of their spokeswoman.
Oh, sorry, [laughter] and.
Thanks Jody.
The.
We do and the.
We're doing the disclose these things so.
As you know whenever we come up with some some vague.
And it very likely could be followed by all of our peers. So the lights too.
And I have all of our cards close to or just on two of the.
The play.
Understood and get back on the queue. Thank you.
Thank you.
Our next question comes from the line of Rich Repetto with Piper Sandler Your line is open.
Thank you good evening Thomas Good evening Paul.
Alright.
Hi, so.
On the over the top number that jumped out at me as the securities lending revenue, so the $175 million and if you look at it it looks like double sort of the run rate of quarterly run rate of last year.
So can you give us I guess is the Paul can you give us any color.
How what drove that or how you exited.
Throughout the quarter and January and February and March and what I don't know what drove that I mean, we do.
Didn't see it it appears like that.
And that much like <unk> like Schwab.
And I'm happy to answer.
Okay.
Are.
You see it.
This is the revenue source that is very.
The.
Slide.
Slightly.
And it has to do with that.
And you have sort.
Thanks, Joe of quantity.
And the stock that is.
And did you call it the bottle and therefore pull mountains of high rate.
And it just so happened that the rule.
And what was wrong and maybe.
A couple of other issues that had the high lending rate and the head.
And to that.
Great deal of it so.
That's the reason for that.
So would you suggest as we look forward that we go back to more of the run rate of last year more of it which is about half of that is that the probably the best of luck.
Yes.
And so Thomas the other thing was you know the 74% year over year comp growth and.
And it seems like you're being reasonably.
Very conservative and.
Going back I guess.
Suggesting that we go back to the 20% year over year of kind of growth and I guess my questions are.
These accounts the.
Boost that we got and the first quarter.
Do we get it isn't there will there be and impact the season, what are you all the seasoning impact to the balances maybe margin balances.
The deposit and the equity balance as of this.
You suggested in the past that they don't fund immediately that it takes a year to year and a half so could we expect an uptick and some of the balances even though we might go to.
More of what do you call. It normalized account growth rate, yes that is correct, but first of all don't forget that.
7000 of these new Guards group.
The aim from that fully authorization from God right.
And they tend to be small at Collins, and and battery and that could do that gods. So.
As far as those that Goldman Sachs and so we are not expecting any growth.
It is generally true that when somebody opens an account with us and each of these days.
And a little bit on the muddy and gradually over the next year or two.
And he says.
And yes.
Yes that is correct so to the extent that we have.
The sharp increase the new accounts, we can expect some follow on funding on the.
Those accounts.
On.
Understood and even if you subtract the 57 it was still alright.
And at least the elevated by historical.
The extended its anyway.
And I guess my last question was.
On the the the need for capital that you talked about Thomas is there any way I believe the cash if you look at cash and.
What do you call regulated.
Cash and I believe that went up from 'twenty to 'twenty 4 billion and the.
And the capital of at nine 4 billion. So I guess my question is how do you is there any way we can sort of ballpark.
And how you come up with the number that you would need more capital.
Great.
The idea of Paul you talked to all of the CF.
Cool.
[laughter] I'd love to talk to you.
[laughter].
So rich the yeah sure the.
What it boils down to is we have all of these different regulatory jurisdictions and each one has a different set of rules. So some are more flexible and others are in the U S. When you see that our customers put in more money deposit more money with us.
Much of that money will be available to lend to other customers who are borrowing money the secured by their their margin will stock, but in other jurisdictions. That's not the case when it has two separate and customer of money and the bank and then finance the Mart.
And of lending so you.
You can't infer from increased credit balances that they are available to fund increased financing and so that put certain constraints on the Austin as we grow greatly and and our non U S affiliates.
We have some commensurate need growing need.
And to have more of our own capital.
And then and on top of and that's on top of having to maintain.
A certain amount of regulatory net capital, which we do and we keep access for you know.
All of the all of the right reason.
But it's it's fragmented and it's devoted to these things which of your opportunity.
Thomas as.
And so as he said before right rather than dividend and get out we're more likely to keep it and in fact try to and.
And try to expand on it.
Okay and just the one little quick thank you.
You also said that you would need more so what's the target if youre at $9 4 billion.
What are you targeting.
Well it depends on the harmony more occupancy there.
Going to open up and and.
The us strongly the the cost of matter base and the margin borrowing and school.
Yes.
But we are unable to use all of our customers' deposits.
And.
So you know.
I don't have the crystal ball.
I think we could very easily used $12 billion at this moment.
The Trump the rightful.
Sure.
Certainly.
<unk> two <unk>.
Yep Yep.
Yeah.
Got it.
That's helpful. Thomas.
Thank you Paul.
Thank you.
Our next question comes from the line of will Nance with.
And with Goldman Sachs. Your line is open.
Good afternoon.
Thomas maybe I can ask a follow up question on the account growth and some of the discussion around marketing earlier I mean, if I go if I go back and kind of prior and the pandemic you were growing accounts kind of 10 to 15000 of months something and in that ballpark, obviously, that's gone up quite a bit and I hear you on not wanting to kind of promise the kind of.
The growth that we've seen more recently going forward, but I think if I kind of take a step back I look at a lot of the new entrants into the brokerage space and even some of the the large competitors and the U S. Like of Schwab for instance, you know youre seeing pretty large numbers in terms of the account growth and a lot of that is just focused in the U S. When you kind of think about the.
The you know the global opportunity that you guys have and just kind of opportunity to grow accounts. I mean, you know what makes you think that you know we necessarily are going to go down back to kind of lower levels going forward and I guess, given the kind of market, where and why or why wouldn't you be kind of significantly increasing the investments and marketing in order to.
And I kind of take advantage of that opportunity.
We view the deal, but so all of our historical.
If I look at our annual report all of our.
All of the five year on.
Gross or anything so all of these seven Boes a day.
So, yes, I mean.
The 30%.
Expectation would be would be quite reasonable and I just think that that.
And a lot of the people who are ready to open and that God.
And thinking about the opening of that gone all opened and that God of the time and I had to stay at home and they had nothing to do they find the they got there and so we had the we had that both Daddy Shaw group of.
The large group of people, who I think so the I D.
And they've all done it so.
Saying that.
You know nowadays.
Smaller.
The group, that's the weekend and wait for them to open day to day count.
Eventually that will leave on the art and we'd be back to the historical average.
And I see one.
Hi.
Going forward would be.
Other than all of our.
And that and its marketing efforts.
So of course, right, but otherwise I don't see.
And it would be.
And much larger appetite for the Collins than there used to be.
Got it okay that makes sense and then just maybe a question on margin balances I you know they've been obviously very very strong recently basically at all time highs and yet when we kind of look at it relative to client equity. They don't appear particularly elevated kind of at the as a percentage of client assets. So I'm. Just wondering if you could talk about the <unk>.
<unk> of some of the recent client cohorts to trade on margin and maybe if you look kind of under the hood among the various client segments. You know how would you how would you kind of characterize margin balances today are kind of relative to history kind of under the hood and kind of adjusted for mix.
So hi.
Well you know the the numbers I'm seeing Oh of course, I I look good and you know it.
And the short or the numbers.
I see margin loans expanding the.
I don't see right then.
Uh huh.
So I I don't see the way you see you.
You you must have looked at some very long term.
Numbers right.
Yeah, I mean, I think historically, you would see on a margin balances and sort of like mid teens as a percentage of client equity and you know I think just given the significant increase in and equity over the past year or so even though the margin balances are up a lot in absolute terms kind of on a relative basis, they've kind of kept pace and and don't appear particularly.
Elevated I guess of myself. So I guess my point is like.
Like when you look at it under the Hood does it does it actually feel somewhat elevated today do you think theres plenty of more room to go could we actually see it return to those kind of mid teens levels that we used to see.
So you know it.
And it states.
The most frustrating Gary up on me I do not.
And right is that.
And also the lowest March and eights and the world and we don't have all of the margin loans.
You know it is all of it is so.
[laughter].
Somewhat stunned.
Okay.
Sounds like maybe there is an opportunity alright. Thank you Thomas I appreciate you taking all my questions.
Thanks.
Thank you.
Our next question comes from the line of Dan Fannon with Jefferies. Your line is open.
Oh. Thank you I was wondering if could talk about the account growth by region and I think you said that the was equally spread out amongst U S Europe and Asia and maybe go on a little bit deeper in terms of those markets and then <unk>.
As you go as Youre, seeing things moderate or slow down or get back to what might be viewed as more normal levels or are there any regions that are slowing down faster.
And these kind of recent days and weeks of activity or is it more broad based.
Yeah, right, so so no slowdown and the fastest.
And.
China and Hong Kong.
Uh huh.
It must have something to do with the with the.
The the.
Chinese.
Gallbladder meant.
Cracking down on banks.
And the money so our customers are.
Find it difficult to and.
On the guns and.
And our China, and the Hong Kong and used to be our fastest growing region.
And.
It suddenly has become.
Good day, all of our slowest growing region.
So, yes that day and so at least that's the degree of this change has occurred.
The arise.
You know the the.
And maybe the fastest growth lately has been from.
On the Middle East.
Great and.
And the Oh and follow up on the kind of I used to.
Ladies and.
Okay.
And then.
And I'll follow up on expenses I understand the normalization of G&A.
But maybe if there are any other kind of deal.
Can you hear me.
Hello.
Hello, Thomas we can hear you can you not hear us.
Yeah.
Hello.
Thomas can you hear us.
Hello.
Hello Hello.
Maybe we can reconnect him.
Yeah.
Okay.
Yeah.
Okay.
Yeah.
Yeah.
We're dialing and getting Thomas back on.
Yeah.
Pardon me Thomas has rejoined.
Yeah I'm sorry.
Along the lines of those jobs.
So where are we.
This is Dan and I can ask my follow up question on expenses, if that's all right.
Great.
So just thinking about the remainder of this year given what you called out of the G&A is there any kind of plan for known expenses that are outside of the normal hiring marketing of that you've already mentioned as we think about just kind of the run rate of.
Hello.
Fixed cost.
And your thoughts on that Paul.
Yeah.
Nothing specific we always try to point out.
And when we have unusual expenses that we don't expect to recur like we did this.
This time around.
Hum.
And the G&A in general as Thomas said, we've been expanding on advertising and marketing.
Otherwise.
There is.
If you take out the unusual item, that's probably around the right run rate and the unusual items was about $19 million.
Okay. Thank you.
Thank you.
Our next question comes from the line of Cal Boyd.
With the <unk> your line is open.
Hi, good evening.
Just another one on on new accounts opened in the quarter, even if you exclude those fully of accounts sold 200000 accounts for me.
The big account growth I guess I'm just curious if we can get some more color about the clients and I'm also wondering.
If you think you saw benefits from some outages that your competitors, but.
With respect to the clients just wondering average.
Average age accounts sizes or are they similar to your existing client base or do.
Do they look much different.
I know they are similar and so all of the average age of all of it.
The irony is 43 years old.
And the United States is 49 years old.
So oh other parts of the world.
It's more of like.
Uh huh.
40, or 39, which then have with regard to force.
Uh huh.
And that's been fairly steady.
So.
Hum.
The dollar.
And you work on the younger.
I don't think so it will be closed before and she has been.
Stay low for a long time.
Got it thank you.
And.
And then the there continues to be more talk of long term capital gains rates being changed and the U S too.
The ordinary income rates for certain income levels.
And I'm just curious to hear if that if that would change your view on the dividend or changing something something with capital return.
<unk>.
And I'm going to happen.
So why would that then ties us too.
Good day of more.
I wasn't suggesting that I was just curious if it would change your capital return policy.
And we will try to each of them unless you know a day.
True.
We're moving more to maybe the buyback would that be something that would be on the table or.
Well, we certainly cannot do that because you see the we have very small float right.
Yep.
And the.
On the tech circumstance, we are in the.
The.
And we cannot.
And we cannot buy back all of the shares that's of high school.
Well as you say.
We prefer to increase the float rather than the reduce it and.
Given that it's the only 29, 8%.
Right.
Alright, but of dividend, but you would consider cutting the dividend and that case.
So you said sorry.
And you're done.
And you don't want it.
Okay.
Okay sorry.
And then one last one from me. Thank you very much for taking my questions. The <unk>.
<unk> increased sequentially.
Was that due to 2000 and probably more for Paul was that due to the.
Currency and mix or was it more of the total margin the.
And from lower balance tiers, and therefore as higher fees.
So you're talking about the.
The margin yield increase sequentially from from <unk>.
Oh sequentially.
Yes, well the <unk>.
And loan balances were up 22% from the prior quarter.
And they come on and sort of bites.
Uh-huh coming and smaller bites, so that they are higher rate it goes.
Got it.
And all of these varied from.
So and 85 basis points to 1211 and 40 something.
It's about 157 now.
And the around seven basis points.
Got it thank you very much.
Thank you.
Our next question comes from the line of Chris Harris with Wells Fargo.
Line is open.
Thanks.
So it's on the kind of a bigger picture industry question for you.
This is an industry that's.
<unk> got a pretty long history of competing on price and I know you guys are are the leaders in that and that area in terms of the.
And that'll be really able to match you on price and a lot of parts of your business, but.
But now the commissions are zero.
What are your thoughts about there being more competition.
And other parts of the business like margin lending and pay rates on deposits not necessarily at I b, but that some of your competitors.
So.
So.
Luke.
And we.
We are the lowest margin.
We don't see them being match the even though.
And just in light of day.
You see the they are not matching them because they are.
Repo during the cost of.
On the seem to be.
Thanks.
The margin.
The so.
You know that they wouldn't want to cut the brands. They are sitting on the by lowering margins because it's it's a day.
Lending money at 678%.
And that's incredibly lucrative and so what they do do is day negotiate some by the cause.
Somebody calls so we go and get on.
And so when we say look why did you come on where are you on it.
Huge large imbalance and you all.
A lot of let's say of Ameritrade and and you were banging this crazy.
And then they say okay. Okay, we'll come over and then the two weeks rates and they tell us what the call them and meet all of them and they said, okay and they gave us and much like Hillary almost match and dealers. So we and all of the coffee.
So that's the story and otherwise, David and not a god the headline rates, but David and negotiate.
Gotcha, alright that makes sense.
And a question about your.
Introducing broker customer segment.
Could you guys tell us like what percent if you know of.
Of Ibs margin balances and SEC lending.
Revenue comes from that particular customer group as it is at a high or low number.
Hi.
Yeah.
And though I look good.
On that.
Oh I'm sorry.
Thank you as a reminder, ladies and gentlemen that star one to ask the question.
We have a follow up question from a line of Craig Siegenthaler with Credit Suisse. Your line is open.
Thank you. So if you take a step back.
What are your thoughts on a more normalized growth rate as we head into 2012.
Relative to the account growth numbers youre experiencing now, especially after we strip out the folio acquisition.
30%.
Hello.
Hey, Thomas I heard your 30% share repurchase.
I I think about this all of the time. So you know its not I view and do I answer it quicker.
Quickly and very best true.
Yes.
Yeah.
Yes.
And Thomas just a follow up on one of the other 30% you said, 30% of all trades, including customer on noncore customer of principle, where we're getting sent to the dark pool, yes.
Yes.
No no I, Didnt say and where was that number a year ago something like on the sort of something I don't know very useful.
I started to pay attention to this yes.
The relatively recently and.
And I know that the it has grown in Idaho, Idaho.
Tools.
But yeah, we are placing more and more emphasis on the debt.
D C of big opportunity there.
Great Thomas Thank you for taking my questions.
Alright.
Thank you.
I'm showing no further questions and the queue I would now like to turn the call back over to Nancy for closing remarks.
Thank you everyone for participating today as a reminder of this call will be available for replay on our website and we will also be posting a clean version of the transcript on our site tomorrow. Thank you again, and we will talk to you next quarter and.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
[music].
[music].
And.