Q3 2022 Interactive Brokers Group Inc Earnings Call
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Hello, Thank you for standing by and welcome to the interactive brokers group third quarter earnings call. At this time all participants are in a listen only mode. After the speaker presentation there'll be a question and answer session to ask a question. During the session you will need to press star one one on your telephone.
Please be advised that today's conference maybe recorded I would now like to hand, the conference over to your speaker today, Nancy Stuebe director of Investor Relations. Please go ahead.
Thank you.
Good afternoon, and thank you for joining us for our third quarter 2022 earnings Conference call.
Once again Thomas is on the call, but asked me to present his comments on the business.
Also joining us today are Milan, Galik, our CEO and Paul Brody our CFO .
After prepared remarks, we will have a 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.
We ask that you refer to the disclaimers in our press release.
Should also review a description of risk factors contained in our financial reports filed with the SEC.
Yeah.
This quarter showed the strength of the interactive brokers business model.
Automating substantial parts of the brokerage business in order to keep costs, low and global product offerings and opportunities high even if the unfavorable market conditions continued to extend into this quarter and beyond.
Well, we were able to maintain our commission income just barely.
It is understandable that in these mostly one way markets only very few retail clients feel any urge to open new brokerage accounts.
This is a large and unfavorable implication for the growth of our business and we expect this to continue into the early part of next year.
In spite of that by this time next year, we expect that our accounts will be about 30% higher than today due to some new larger introducing broker relationships, we have mentioned earlier.
Preparing to onboard these accounts is a very slow process.
And it is unlikely that any sign of these will show before the spring.
Account number growth comes on the retail and from direct and introducing broker customers.
Much of our commission income comes from hedge funds and proprietary trading groups.
And average hedge fund account generates 67 times as much revenue as an average individual account.
And for prop trading accounts to small supplier is around 10.
Hedge funds and proprietary trading accounts are less affected by the direction of the markets and are therefore, our emphasis has turned more in their direction lately.
His most recent bracken statistics illustrate for the past three consecutive years the number of hedge funds on our platform has grown faster than at any other leading bank or broker.
I became hours now the sixth largest provider of prime brokerage services by number of funds and.
And we feel fairly confident about moving to be number four in the current year right behind Morgan Stanley Goldman and J P. Morgan.
This growth in hedge fund accounts is happening, even though we still do not provide some of the products hedged funds views.
Non exchange listed products outside of cash Forex.
Firsthand research organization of meetings and introductions to corporate Ceos or cfos.
Our reversion toward non exchange listed products is due to a fear of taking on counterparty credit risk that often turns out to be the source for existential difficulties in the business.
But these products also create opportunities for outsized trading gains is there usually exchange listed options.
And different cloth I E different custom made terms, but they are always ultimately hedged by exchange listed products.
Since their terms are unique they cannot be directly compare to anything to ensure reasonable pricing.
Well, we are not going to change our stance with respect to OTC products, we do not feel the same way about other products like research and corporate introductions.
And as we continue to grow in this business that is something we may consider in the future.
The point is that ever since we started in the brokerage business. We said that we'll build our platform for the most demanding investors and we automate it so that we can easily make it available for anyone who make her to use it.
We were often told that that was not a realistic approach.
You must choose your target audience.
Relying on our growing hedge fund customer base, we are now able to turn this logic around and market the platforms with the more sophisticated individual investors by saying to them to get better results get a better platform the.
The best informed investors she's interactive brokers.
We are planning to use this as our tagline and our branding efforts.
Yeah.
Another welcome development during the quarter.
The growth of our bond platform.
For many years. This platform has been growing very slowly recording about 1000 trades a day.
Suddenly with more active bond market volumes. This now reaches 3000 transactions a day.
Given the relevance of bonds are bonds marketplace has a search tool where you can scan by maturity date yield to worst and duration to analyze and compare issuers and savior scant run again at any time.
Yeah.
Many of our customers realize that they can achieve better execution prices by sending us limit orders between the prevailing bids and offers.
We go out to numerous other platforms to show these orders, but if no trade occurs and we get an offsetting order we match the two.
We also have order types that instruct us to keep the order internally and wait for a match.
This way the client is not driving the quote in the market against yourself.
Okay.
Despite the slower growth in accounts, we welcomed our two millionth customer in September less than two years after adding our one millionth customer and ended the quarter with a record 2.012 million accounts, an increase of 31% from last year.
We saw account growth in all client segments in all geographic regions, with particular strength, 43% and 31% in Europe and Asia.
Which together represent the majority of our accounts.
Account growth once again occurred in all five of the client types that we service <unk>.
Individual account growth was fastest of 38%.
Solid by proprietary traders at 28% introducing brokers that 20% financial advisors at 14% and hedge funds at 13%.
Commission per Dart continues to rise as our clients continue to be active in options and especially in futures, which carry a higher commission, although the bulk of that goes to exchange fees.
In equities higher commission per Dart was driven by a mix with fewer penny stock orders, where we limit our commissions not to exceed 1% of trade value.
Higher futures commissions include very high exchange and regulatory fees, which in part explain a higher execution and clearing direct expense.
An advantage of providing many product types worldwide customers is the ability to capture opportunities when one product or another it becomes active.
This quarter, while stock share volumes were below those of last year options and particularly futures volumes remained strong.
We're always looking to find opportunities to grow our business.
We've been letting investors know that interactive brokers pays its clients, 2.58% on their cash balances and.
And if the federal reserve raises rates again by 75 basis points and their rate will also rise by 75 basis points to 333%.
We recently introduced our options Wizard, a tool where you can enter your outlook about the future of the underlying price movement and the Wizard will provide some standard strategies that can be filtered by aggressiveness or by probability of profit.
Or you can set up your own strategy.
Continuing high inflation is a catalyst that convinces people that holding on to their money is cash will not earn them any return.
Investing in securities worldwide will be necessary for a chance to earn a positive rate of return.
Which is why we are focused on investor educational materials like our traders Academy courses are webinars podcasts and blogs to inform our customers and make our platform the platform of choice for successful investors.
The 2 million, we have and the millions more we hope to have.
With that I will turn the call over to our CFO , Paul Brody, who will go through the numbers for the quarter.
Paul.
Thank you Nancy and thanks, everyone as usual for joining the call.
We will review the third quarter operating results and then we'll open it up for questions.
With our revenue items on page three of the release we.
We recorded another strong quarter with record net revenues and pretax income on an adjusted basis.
Customer count growth of 31% year over year, we continue to expand our potential for both commission and interest revenues in the future.
Commissions were strong reaching $320 million.
Bite weak equity markets worldwide futures volume outpaced the third quarter of 2021 options volume was roughly unchanged.
And while stock share volumes decline from last year's quarter. The drop in notional dollar value stock trades was generally in line with the drop in regional equity indices around the world.
Net interest income of $473 million.
<unk> higher margin loan interest despite lower balances thanks to increases in benchmark rates and.
And higher interest earned on our segregated cash portfolio as U S rates have moved from an average effective rate of nine basis points last year.
<unk> 218 basis points in this year's quarter.
These gains were partially offset by higher interest paid on customer credit balances.
As we pass through rate hikes about 50 basis points to our customers on their qualified fun.
Other fees and services generated $45 million with the biggest contributors being in market data fees of $19 million unchanged and.
Options exchange liquidity payments of $9 million down 18% from the prior year.
Risk exposure fee revenues was <unk> five.
$5 million down 38% in the current risk off environment.
Other income includes the gains and losses on our investments.
Currency diversification strategy and principal transactions.
Note that many of these noncore items are excluded in our adjusted earnings.
These excluded items other income was $9 million for the quarter.
Turning to expenses.
Execution clearing and distribution costs rose, 41% from last year.
Led by lower liquidity rebates higher futures volumes, which carry higher fees.
And an increase in the SEC fee rate on U S stocks and options.
As a percent of commission revenues execution, and clearing costs, which are driven by a combination of trading volume exchange rebates and changing fee schedules were 21% this quarter versus 18% in the second quarter.
Note that market data expense.
Through item is included in execution clearing and distribution fees.
While the corresponding market data revenue.
As reported in other fees and services rather than in commission.
So to align with volume driven expenses with commissions, we look at pure execution and clearing costs, excluding market data expense.
Compensation and benefits expense rose $14 million or 14% over the prior year.
Align with hiring.
Up in dollar terms for the quarter comp and benefits expense fell to 13% of our <unk>.
<unk> net revenues somewhat below its historical level.
Our head count at quarter end was 2000 and 752.
G&A expenses were down $7 million or 16% versus last year's third quarter on lower legal expenses from a higher than typical number last year.
Yeah.
Our adjusted pre tax margin was a record 68%.
Automation remains our key means maintaining high margins.
As well as continued expense control, while we hire talented people and invest in the future of our business.
Income taxes at $40 million reflects the some of the public companies $23 million and the operating companies $17 million.
Moving to our balance sheet on page five of the release.
Our total assets were 115 billion at the end of the quarter.
With growth over the last year, driven by increases in our segregated cash and securities partially offset by a reduction in customer margin loans.
We maintain a balance sheet aimed at supporting our growing business and providing ample financial resources during volatile markets.
We have no long term debt.
And our operating data on pages six and seven.
Our contract volume for all customers were strong about even with the strong prior year quarter and options and the third highest ever and futures up 37%.
Stock share volume was down significantly versus last year's active third quarter.
And the drop off is largely attributable to trading in pink sheet and other very low priced stocks.
Of note the notional dollar value of shares traded dropped less than a number of shares traded.
Reflecting this shift away from low priced stocks, which tends to raise the average commission per order.
On page seven you can see that our account growth remains robust with nearly 90000 net account adds in the quarter.
In total account.
Total accounts exceeding 2 million up 31% over the prior year.
Total customer darts were $1 9 million trades per day down 15% from the strong prior year quarter.
Our cleared I became our pro customers paid an average of $2.96 Commission per cleared commission of order.
Up 20% from last year.
As our clients volume mix included higher per order contributions from stocks and options.
Hey, Jay presents our net interest margin numbers.
Total GAAP net interest income was $473 million for the quarter up 73% on a year ago quarter, reflecting stronger margin loan and segregated cash interest.
Offset by higher interest expense on customer cash balances.
The Federal reserve raised interest rates twice in the quarter by 75 basis points in late July .
A further 75 points.
Late September with about a week left in the quarter.
The latter raised.
Minor positive impact and a 12 week quarter, but we will have a fuller positive impact in the third quarter.
Many other central banks also raised rates this quarter.
This group includes the UK, Canada, Australia, and Hong Kong as well as the Eurozone in Switzerland, which are now out of negative rate territory for the first time since 2014.
Margin loan interest was up 125% to $317 million. Despite average margin loan balances that were down 9% from last year's third quarter.
Higher rates in the U S and internationally continue to bode well for our margin interest income.
Net interest on segregated cash was $228 million, primarily due to federal reserve rate hikes, but also to our managing to short duration Uninvested funds, which has allowed us to pick up benchmark rate increases quickly.
At September 30th.
U S portfolio duration was 42 days, so the investment's rollover into new higher rates with fairly short lag time.
Securities lending net interest was $114 million down 7% from the year ago quarter.
It's worth noting that while securities lending opportunities maintain a relatively strong pace it.
It is also the case that as benchmark rates rise greater a greater portion of the revenue generated by securities lending.
As reflected in interest on segregated cash.
Because the cash collateral received has invested a segregated funds.
We estimate this impact to be about $24 million for the quarter versus the year ago quarter.
Interest on customer credit balances or the interest repay our customers.
Grew as higher rates in many currencies led to our paying interest on qualifying accounts.
We pass through rate increases.
We paid $248 million to our customers on these balances in the third quarter.
Now for our estimates of the impact of increases in rates.
Given the market expectations of more rate hikes to come.
We estimate the effects of increases in the fed funds rate to produce an additional annual net interest income as follows.
A 25 basis points, an increase of $55 million.
At 50 basis points, an increase of $110 million.
At 75 basis points, an increase of $166 million.
And at 100 basis points, an increase of $221 million.
That our starting point for these estimates as September 30th with the fed funds effective rate at three 8% and based on balances at that date.
These estimates do not take into account any change in how we may adjust our investment strategy to take advantage of newly higher rates or any change in our asset.
About 20% of our customer segregated cash is not in U S dollars.
We estimate the U S rate change impact exclude those currencies.
We estimate a 25 basis point increase in all of the relevant non USD benchmark rate.
Would produce an additional annual net interest income of $14 million and rising to about $56 million at a 100 basis point rate increase.
In conclusion, the company generated another solid performance in the third quarter.
Our continued ability to grow our customer base deliver on our core services to customers, while continuously adding new features and products all at a low cost and managing the business effectively with strong expense control.
And with that we will open it up for questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone please standby, while we compile the Q&A roster.
Our first question comes from Richard Repetto with Piper Sandler You May proceed.
Good evening Thomas Good evening Paul.
I guess the question first question is on account growth.
<unk> you.
Promise you had sort of one that you were starting to feel.
Sure.
A slowdown but.
But if you look at the quarter.
A couple more.
Months at about 20, 25000, and then one August .
Excuse me 38000.
So can you give us what you feel like is the run rate going forward and what happened why August .
35% to 50% higher than the other months and just a little bit of color on I guess the delay I guess just administrative delays with these.
<unk> broke brokers.
So look back on growth is very lumpy.
Some Dod is the we get introduced.
Introducing brokers or larger our eyes, who barton drop at all.
<unk> seen the same months and I'll be your bonds.
Much fewer of those but yes.
Generally understand that in these markets people are not that venture is to open our cogs.
Ed.
Are you at Cagny that brokerage firm.
Got it.
Markets right.
Okay.
That's I think that's pretty clear to everybody.
So as I.
I expect the market to continue to go down for a while.
I expect the new account openings due to become even slower going forward.
But as we have indicated before that we have two large.
Introducing broker accounts that we are going to onboard.
Probably early next year and.
Two value frankly, I am maybe Milan.
Talk a little bit about why but all of the complexities are wide.
Got it.
Okay.
Sure.
So they are really two different things going on one of them has to do with the fact that we are dealing with larger organizations.
And two just to arrive in the agreement.
We can both live with it takes a while they are there is an army of lawyer lawyers involved in there and there is a smaller group of lawyers involved on our end and we have to hammer out the contract in a way that is acceptable to both of us.
The liabilities are or the economic side et cetera et cetera.
So that's on the legal side on the technology side.
Two things have to happen first the broker has to choose the way theyre going to interact with us how they are going to integrate our they are clients going to use our platform or is the IV route you're going to provide theirs is there going to be fixed connectivity involved how long are the accounts.
Going to be opened all these details first half to be figured out they have to choose the right solution for them and then the integration work starts we have to do some software customization for them. They have to do a lot of interfacing work on their end.
Typically it takes a while.
Okay.
Got it. Thank you that's very help help them, along and Thomas and I guess a follow up question.
Paul.
It would be on this.
Stock loan I'm trying to understand what you meant for $24 million that was.
Paid on segregated cash is that really a subtraction.
What would be revenue allocated to securities lending is that what youre trying to communicate its just purely a matter of which line item.
Income is reported on.
So.
As rates go up when you blend stock and taken cash collateral.
On behalf of the customer.
Cash gets put into segregated bank account.
Treasuries and so forth.
And so that simply get the interest earned.
As reported as segregated cash interest and as the rates go up more interest goes there.
And.
A stable amount of securities lending revenue stays in securities lending.
Okay. So so we'd actually would be like if you just have to net out the revenue from securities lending whether it would be.
Paid in interest on cash.
Cash.
It would probably be.
It's not $1 14 compared to I think it was.
Pretty flat year over year it would be.
It would be down is that what you're saying.
Okay.
Thanks, Greg Yes.
Think of it this way when you when you blend stock and taking cash collateral.
Yeah.
There is a base interest rate benchmark rate to call. It a federal funds rate right.
There is a fee for borrowing the stock that the borrower pays to the lender and we are at the lender.
The fee is always reflected as securities lending.
In the U S. However.
He is embedded into an all in rate that includes interest paid on the cash collateral and a fee charged to the lender.
But only the fees should show up in securities lending.
It's an accounting convention, if you will but in reality.
Cause the cash side of the transaction must go into segregated cash.
As the rates go up.
Interest income in a sense migrate from the securities lending reporting line to the segregated cash reporting line.
Got it.
Understood.
It's really.
Net interest income definitely show the sensitivities that you put out so it's not really material I guess thank you.
Thank you one moment for questions.
Our next question comes from Craig Siegenthaler with Bank of America, You May proceed.
Good evening, Thomas and congratulations on eclipsing 2 million accounts.
Thank you.
So for the 30% account growth target over the next 12 months.
Roughly how much of that do you see coming from the three large introducing broker wins are they driving 75% of that.
Got it.
Yes.
65 to 75, yes.
Got it.
And then just to confirm I think Nancy said no account inflows from those before the before the spring. So April so I'm guessing, we'll see none of it.
Hi, Julia.
Sure Bob Pape, Rami, maybe you know.
So maybe Dave you had opened stomach cogs for the employees themselves.
And then.
One of these.
Banks is going to.
Being up.
Sure.
I'd cards country by country, and we've done exactly no.
The order that is going to take place so.
I would say.
Early as maybe February .
Maybe April .
Okay.
Great Thomas.
Thomas Thank you for taking my questions.
Thank you for asking it.
Thank you one moment for questions.
Our next question comes from Ben <unk> with Barclays. You May proceed.
Hi, guys. Thanks, so much for taking my question I wanted to kind of follow up on the introducing broker topic, but maybe instead of talking about.
The pipeline of new accounts could you, perhaps talk a little bit about the pipeline of introducing brokers. So you mentioned that retail investors may be reluctant to open a new account in this environment, but are you finding the same sort of sentiment from potential new partners banks and other.
Financial institutions that maybe a year from now you may be telling us about the next wave of introducing brokers. So I guess the question is how is the sentiment with that customer group.
So obviously the demand is.
Probably very similar across different brokers.
And then we are talking about onboarding garage and introducing brokers.
Talking about data existing accounts.
Okay makes sense, maybe one more one follow up if I could could.
Could you maybe talk a little bit about the hedge fund business since that seems to be where are you going to be a little bit more focused kind of in the near term, maybe just kind of help us understand a little bit the cost structure. I think you gave some helpful stats around the average revenue for your hedge fund and market, making clients, but is it in terms of the kind of net margin there or is it more costly to serve or is it.
Kind of a higher margin group just given the.
I was not I was not talking.
Think about the cost side, we're talking about revenues.
The revenues and.
From hedge funds and the revenues coming from individual customers.
Okay.
Through that.
67.
Individual accounts.
As much revenue as an average hedge fund background in our case right and in our case among the individual that caused a smaller contract larger content around that it's wrong.
So small electronics in large accounts, but so I'm just working with the <unk>.
Okay, great. Thanks, so much for taking my questions.
Thank you one moment for questions.
Our next question comes from Daniel Fannon with Jefferies. You May proceed.
We can hear you.
Daniel Fannon. Your line is on mute please UN mute.
You May ask your question.
One moment for questions.
Our next question comes from Craig Siegenthaler with Bank of America, You May proceed.
Great. Thanks for taking the follow up I had a follow up on the hedge fund Prime commentary that you gave earlier in the call.
Are you starting to win business more from larger hedge funds.
Or is it growth, mostly from kind of smaller funds, where I believe most of your business.
And also where are you stealing.
This share from within the Prime industry and also can you just comment on in terms of how.
This is going to drive earnings growth longer term, just given the size differential.
So yes, we have.
Almost all smaller hedge funds come through us now.
And.
We believe.
And like Ed.
You are beginning to look at us and a good day.
Usually back with two three maybe four.
Deeper and custodians or at least executing brokers.
These larger brands.
Are talking to us more seriously and are giving us a little bit of their business, but were very happy to take a little bit because the Ob <unk>.
Good day.
Hey.
Beginning to use us David.
They are advantages.
Can offer analytics too.
Carsten.
Their cash flow.
They are using.
Thomas and it sounds like since you are very focused on growing this business I believe it's there is somewhat sensitive to the amount of capital you have so maybe can you talk about when you will feel more comfortable.
No probably not buying back stock just given the stock liquidity, but maybe raising the dividend or returning more capital to shareholders. Just because I believe a lot of those hedge funds are sensitive to how much capital you have.
I completely agree with you and we are not going to increase the dividend I guess.
And to grow with their capital.
Thomas Thanks for taking my follow ups.
Thank you.
Thank you one moment for questions.
Okay.
Yes.
Our next question comes from Ryan Bailey with Goldman Sachs. You May proceed.
Hi, everyone.
Paul in the right guidance for a few quarters now you've mentioned that the guidance based on nerve change in strategy to take advantage of higher rates I was wondering.
Is there a consideration to change some of the strategy around <unk>.
Around rate sensitivity.
We don't have any immediate plans we have stayed short term because of the uncertainty in the markets and certainly with rates going up we were able to capture that.
The upswing much quicker than had we been invested further out.
There wasn't a yield curve for a long time, its sort of developing but it's still only developing out to a year.
So I think.
We are unlikely to.
Make any meaningful changes there.
Thomas if you'd like to add anything to that please feel free.
Yes, I like to point out that.
Repay our.
In fact, the idle cash or are customers more than anybody that we know.
And so we have.
Basically I don't have that.
80 basis point spread that we earn on customer's idea cash so that puts us into a position that we have to be extremely careful about harbin is cash because when interest rates go up immediately.
The amount that we pay to our customers. So if we were invested say two years forward two years forward.
Interest rates ran up it would be immediately have to.
Increase that payout, but they have taken.
Taken would not increase immediately right. So we can put ourselves into a position where we are very much respect.
Alright.
Understood. Thank you. Thank you for the color, maybe maybe sort of taking.
That last point.
I apologize if I missed it but can you give us an update on where that sort of non rate sensitive cash sits today, what that balance looks like.
As we get through some of these introducing brokers does that have any impact on what those cash balances could look like.
I don't know if any of you out there.
I believe thats very tied do without.
So Ryan you were asking about the fully sensitive balances.
The other side of it so the balances where I think it's below 10000 in cash per account that youre youre not paying right Colin.
Alright, so thats certainly the bulk of it and there are a few other categories there.
Totaling about $20 billion out of our.
Total, which.
Allows us to earn rate increases.
And on the rest were locked into our spread.
So.
The.
Net interest income increases will come from growing balances, but not from growing spread.
Understood. Okay. Thank you.
Thank you one moment for questions.
Our next question comes from Chris Allen with Citi. You May proceed.
Afternoon, guys. Appreciate you taking the questions I guess, just following up a little bit on the introducing broker.
The ones that are coming over next year or are these going to be fully disclosed or omnibus I'm, assuming fully disclose given the account impact.
Yes, so they are going to be bringing us individual accounts or it's going to be a structure with a master account at the top.
Lots of sub accounts underneath.
As to fully disclosed its not going to be a fully disclosed relationships or the client will not know unless they try to research it.
Who the ultimate provider of the services.
They will have the the contract with their the introducing broker.
But to answer your question most directly it's going to be lots of accounts mopping up the bus.
Got it understood.
Just on the outlook for hedge funds moving up to number four.
Is that some analysis that you've done or is this based on kind of industry stats just trying to understand just to dig a little deeper it seems to have a real nice opportunity moving forward.
Yes, it's the industry stats and we see out there, but we.
We're getting a new funds.
We are doing very well, we're getting good new funds got it easily.
Got it. Thank you guys that's it for me.
Yeah.
Thank you one moment for questions.
Our next question comes from Daniel Fannon with Jefferies. You May proceed.
Hi, Thanks can we try this again can you hear me.
Yes.
So a question just on expenses came in a little bit better in this quarter and thinking about the fourth quarter and into next year.
Just the progression of spend if there is.
You bring on some of these larger introducing brokers should we anticipate some.
Additional expenses for that process into or any change in priority as you think about spend into next year that youre contemplating at this point.
So.
No.
Introducing brokers or not.
Thank you Jim.
Yes.
These introducing brokers are not expecting to lines of attorney Blake I'm sorry.
So we're always trying to remove mines.
Excellent.
No.
We're not going to tell you that we do not expect to hire.
A large number of equal to 70 C Hydro Chris.
But we are going to use the technology.
Developing over the past decade.
So do you expect.
Very large number of solid becomes if you're a consumer base.
The number of customer service Representatives will be will have to increase R&D debate.
But we expect the Gi brokerage to provide the customer service themselves.
On the compliance side the situation is different.
Because we are responsible for doing this with Valens <unk> modules.
As well as the trading activity.
He is going to be some number of surveillance, Tom I'll be specific related to art.
But that number also.
Would be required.
Zero.
Number of accounts.
Do you guys could colleagues with our clients or our broker clients.
And as far as expenses I would like to add there.
That you are batteries die of inflation.
We have to increase our compensation.
At year end.
In line with.
Inflation rates.
Great and then just in terms of broadly account growth in the regions. You mentioned the sub segments of your customer base is from a geographic perspective are there areas that you are having greater success or youre seeing more pullback understanding that broadly as you said earlier the sentiment has been great for new accounts.
Gross.
So, yes, I mean Asia Asia.
About a year ago.
<unk>.
Europe joined two went out there Raj do you have any.
To the Ukraine, so yes.
The slowdown is.
And as we go along.
Slow down.
Becoming more and more.
At Patterson.
No.
In the United States.
The Americas in general the slowdown is less bad than.
In Europe and Asia.
Great. Thank you.
Thank you one moment for questions.
Our next question comes from Kyle Voigt with Keyw you May proceed.
Hi, good evening, Thanks for taking my question.
Maybe just one for Paul.
And sorry, if this was addressed earlier I dropped off the other net interest income increased to $65 million in the quarter.
It's just the majority of that increase driven by higher interest on corporate cash balances I know there is some other items in there too, including the FDIC sweep. So I just want to get some clarity there.
Yes, that's right Cai it's primarily.
Corporate cash.
<unk> as you know with rates near zero.
Near zero. So therefore, we're now earning.
With the current benchmarks.
Got it and then the.
Is there just any update you can give us on.
The percentage of your balances are there or does it just absolute level. The cash balances that are their credit balances that are non rate sensitive or I guess noninterest bearing.
Yes, absolutely we did mentioned that before it's about $20 billion out of the total.
Okay perfect. Thank you.
Fully fully rate sensitive and partially rate sensitive.
Perfect. Thank you.
And then I just wanted to ask a clarification question regarding the introducing broker on boardings.
Last quarter, you mentioned several relationships that you expect it to begin Onboarding and Thomas I think you mentioned two large IBM specifically I just wanted to clarify was there any potential introducing broker clients that decided not to move forward with the relationship or is this just purely a timing issue and the pipeline hasnt changed at all in.
Terms of number of clients.
There is no change in terms of number of clients.
Okay, great. Thank you very much.
Thank you one moment for questions.
Our next question comes from Richard Repetto with Piper Sandler You May proceed.
Yes, Hi, Thomas I was just going to quickly follow up I know you are very conservative on the account growth and if I just did the math and.
If the introducing brokers of 65% to 75% of your goal of 30% account growth overall.
It just puts you or would you I don't know what you would call it.
Ganic account growth at numbers that certainly lower than what we've seen in the since the pandemic started and I guess the question is is that.
Is that how you see the sort of near term year to next year or two.
The account growth slowing back to 2019 levels.
Okay, Okay, sorry, yes.
I think that because because as I said I expect the market not to be very boring and so.
I think that individual clients.
We are going to dry up more and more and more as we go into next year.
Okay.
Got it.
Sure.
Thank you.
Thank you.
And I'm not showing any further questions at this time I would now like to turn the call back over to Nancy Stuebe for any further remarks.
Thank you everyone for participating today as a reminder, this call will be available for replay on our website and we will also be posting a clean version of our transcript on the site tomorrow.
Thank you again, and we will talk to you next quarter end.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
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