Reports Comprehensive Earnings Per Share of
Declares Quarterly Dividend of
Excluding other comprehensive income, the Company reported diluted earnings per share of
Net revenues were
The results for the quarter were positively impacted by strong growth in net interest income, which increased
In addition, the results for the quarter include a
On
The
Business Highlights
- 57% pretax profit margin for this quarter.
- 59% Electronic Brokerage pretax profit margin for this quarter, down from 68% in the year-ago quarter.
- (275)% Market Making pretax profit (loss) margin for this quarter, down from 34% profit margin in the year-ago quarter.
- Customer equity grew 38% from the year-ago quarter to
$96.8 billion and customer debits increased 39% to$20.9 billion . - Customer accounts increased 18% from the year-ago quarter to 406 thousand.
- Total DARTs decreased 12% from the year-ago quarter to 657 thousand.
- Brokerage segment equity was
$4.3 billion . Total equity was$6.0 billion .
Segment Overview
Electronic Brokerage
Electronic brokerage segment income before income taxes decreased 21%, to
Other income decreased 59% over the year-ago quarter, driven by a non-recurrence of net mark-to-market gains on investments in
Customer accounts grew 18% to 406 thousand and customer equity increased 38% from the year-ago quarter to
Market Making
Market making segment income before income taxes decreased to a loss of
Effects of Foreign Currency Diversification
In connection with our currency diversification strategy, we have determined to base our net worth in GLOBALs, a basket of 15 major currencies in which we hold our equity. In this quarter, our currency diversification strategy increased our comprehensive earnings by
In light of our decision to discontinue our options market making activities globally, we removed the
The new composition contains 14 currencies, one fewer than the prior composition. The new composition was effective as of the close of business on
_______________________
1 Daily average revenue trades (DARTs) are based on customer orders.
Conference Call Information:
The conference call will also be accessible simultaneously, and through replays, as an audio webcast through the Investor Relations section of the
About
Cautionary Note Regarding Forward-Looking Statements:
The foregoing information contains certain forward-looking statements that reflect the Company’s current views with respect to certain current and future events and financial performance. These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the Company’s operations and business environment which may cause the Company’s actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. Any forward-looking statements in this release are based upon information available to the Company on the date of this release. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. Additional information on risk factors that could potentially affect the Company’s financial results may be found in the Company’s filings with the
OPERATING DATA |
|||||||||||||||||||||||||||
TRADE VOLUMES: (in 000’s, except %) |
|||||||||||||||||||||||||||
Brokerage | |||||||||||||||||||||||||||
Market | Brokerage | Non | Avg. Trades | ||||||||||||||||||||||||
Making | % | Cleared | % | Cleared | % | Total | % | per |
|||||||||||||||||||
Period | Trades | Change | Trades | Change | Trades | Change | Trades | Change | Trading Day | ||||||||||||||||||
2014 | 64,530 | 206,759 | 18,055 | 289,344 | 1,155 | ||||||||||||||||||||||
2015 | 65,937 | 2% | 242,846 | 17% | 18,769 | 4% | 327,553 | 13% | 1,305 | ||||||||||||||||||
2016 | 64,038 | -3% | 259,932 | 7% | 16,515 | -12% | 340,485 | 4% | 1,354 | ||||||||||||||||||
1Q2016 | 17,255 | 71,145 | 4,731 | 93,131 | 1,527 | ||||||||||||||||||||||
1Q2017 | 12,224 | -29% | 62,914 | -12% | 3,665 | -23% | 78,803 | -15% | 1,271 | ||||||||||||||||||
4Q2016 | 15,253 | 63,074 | 3,933 | 82,260 | 1,316 | ||||||||||||||||||||||
1Q2017 | 12,224 | -20% | 62,914 | 0% | 3,665 | -7% | 78,803 | -4% | 1,271 | ||||||||||||||||||
CONTRACT AND SHARE VOLUMES: | ||||||||||||||||||
(in 000’s, except %) | ||||||||||||||||||
TOTAL | ||||||||||||||||||
Options | % | Futures* | % | Stocks | % | |||||||||||||
Period | (contracts) | Change | (contracts) | Change | (shares) | Change | ||||||||||||
2014 | 631,265 | 123,048 | 153,613,174 | |||||||||||||||
2015 | 634,388 | 0% | 140,668 | 14% | 172,742,520 | 12% | ||||||||||||
2016 | 572,834 | -10% | 143,287 | 2% | 155,439,227 | -10% | ||||||||||||
1Q2016 | 151,912 | 41,238 | 38,350,112 | |||||||||||||||
1Q2017 | 121,155 | -20% | 30,366 | -26% | 53,300,920 | 39% | ||||||||||||
4Q2016 | 141,695 | 34,173 | 41,805,268 | |||||||||||||||
1Q2017 | 121,155 | -14% | 30,366 | -11% | 53,300,920 | 27% | ||||||||||||
MARKET MAKING | ||||||||||||||||||
Options | % | Futures* | % | Stocks | % | |||||||||||||
Period | (contracts) | Change | (contracts) | Change | (shares) | Change | ||||||||||||
2014 | 344,741 | 15,668 | 12,025,822 | |||||||||||||||
2015 | 335,406 | -3% | 14,975 | -4% | 15,376,076 | 28% | ||||||||||||
2016 | 307,377 | -8% | 14,205 | -5% | 13,082,887 | -15% | ||||||||||||
1Q2016 | 82,345 | 4,344 | 4,618,495 | |||||||||||||||
1Q2017 | 52,291 | -36% | 2,511 | -42% | 1,954,775 | -58% | ||||||||||||
4Q2016 | 73,843 | 3,481 | 2,249,744 | |||||||||||||||
1Q2017 | 52,291 | -29% | 2,511 | -28% | 1,954,775 | -13% | ||||||||||||
BROKERAGE TOTAL | ||||||||||||||||||
Options | % | Futures* | % | Stocks | % | |||||||||||||
Period | (contracts) | Change | (contracts) | Change | (shares) | Change | ||||||||||||
2014 | 286,524 | 107,380 | 141,587,352 | |||||||||||||||
2015 | 298,982 | 4% | 125,693 | 17% | 157,366,444 | 11% | ||||||||||||
2016 | 265,457 | -11% | 129,082 | 3% | 142,356,340 | -10% | ||||||||||||
1Q2016 | 69,567 | 36,894 | 33,731,617 | |||||||||||||||
1Q2017 | 68,864 | -1% | 27,855 | -24% | 51,346,145 | 52% | ||||||||||||
4Q2016 | 67,852 | 30,692 | 39,555,524 | |||||||||||||||
1Q2017 | 68,864 | 1% | 27,855 | -9% | 51,346,145 | 30% | ||||||||||||
* Includes options on futures | ||||||||||||||||||
OPERATING DATA, CONTINUED |
||||||||||||||||||
BROKERAGE CLEARED | ||||||||||||||||||
Options | % | Futures* | % | Stocks | % | |||||||||||||
Period | (contracts) | Change | (contracts) | Change | (shares) | Change | ||||||||||||
2014 | 225,662 | 106,074 | 137,153,132 | |||||||||||||||
2015 | 244,356 | 8% | 124,206 | 17% | 153,443,988 | 12% | ||||||||||||
2016 | 227,413 | -7% | 128,021 | 3% | 138,523,932 | -10% | ||||||||||||
1Q2016 | 58,531 | 36,546 | 32,617,117 | |||||||||||||||
1Q2017 | 60,366 | 3% | 27,528 | -25% | 50,397,970 | 55% | ||||||||||||
4Q2016 | 59,354 | 30,452 | 38,598,113 | |||||||||||||||
1Q2017 | 60,366 | 2% | 27,528 | -10% | 50,397,970 | 31% | ||||||||||||
* Includes options on futures | ||||||||||||||||||
BROKERAGE STATISTICS | |||||||||||
(in 000’s, except % and where noted) | |||||||||||
Year over Year | 1Q2017 | 1Q2016 | % Change | ||||||||
Total Accounts | 406 | 345 | 18% | ||||||||
Customer Equity (in billions)* | $ | 96.8 | $ | 70.1 | 38% | ||||||
Cleared DARTs | 609 | 688 | -11% | ||||||||
Total Customer DARTs | 657 | 748 | -12% | ||||||||
Cleared Customers (in $’s, except DART per account) | |||||||||||
Commission per DART | $ | 4.01 | $ | 3.86 | 4% | ||||||
DART per Avg. Account (Annualized) | 385 | 513 | -25% | ||||||||
Net Revenue per Avg. Account (Annualized) | $ | 3,157 | $ | 3,709 | -15% | ||||||
Consecutive Quarters | 1Q2017 | 4Q2016 | % Change | ||||||||
Total Accounts | 406 | 385 | 5% | ||||||||
Customer Equity (in billions)* | $ | 96.8 | $ | 85.5 | 13% | ||||||
Cleared DARTs | 609 | 591 | 3% | ||||||||
Total Customer DARTs | 657 | 640 | 3% | ||||||||
Cleared Customers (in $’s, except DART per account) | |||||||||||
Commission per DART | $ | 4.01 | $ | 4.01 | 0% | ||||||
DART per Avg. Account (Annualized) | 385 | 394 | -2% | ||||||||
Net Revenue per Avg. Account (Annualized) | $ | 3,157 | $ | 3,205 | -1% | ||||||
* Excludes non-customers. | |||||||||||
SEGMENT FINANCIAL INFORMATION (UNAUDITED) |
|||||||||||
Three Months | |||||||||||
Ended |
|||||||||||
2017 | 2016 | ||||||||||
(in millions) | |||||||||||
Electronic Brokerage | Net revenues | $ | 314 | $ | 347 | ||||||
Non-interest expenses | 129 | 112 | |||||||||
Income before income taxes | $ | 185 | $ | 235 | |||||||
Pre-tax profit margin | 59% | 68% | |||||||||
Market Making | Net revenues | $ | 8 | $ | 59 | ||||||
Non-interest expenses | 30 | 39 | |||||||||
Income (loss) before income taxes | $ | (22) | $ | 20 | |||||||
Pre-tax profit (loss) margin | -275% | 34% | |||||||||
Corporate (1) | Net revenues | $ | 52 | $ | 83 | ||||||
Non-interest expenses | 2 | 1 | |||||||||
Income before income taxes | $ | 50 | $ | 82 | |||||||
Total | Net revenues | $ | 374 | $ | 489 | ||||||
Non-interest expenses | 161 | 152 | |||||||||
Income before income taxes | $ | 213 | $ | 337 | |||||||
Pre-tax profit margin | 57% | 69% | |||||||||
(1) | Corporate includes corporate related activities as well as inter-segment eliminations and gains and losses on positions held as part of our overall currency diversification strategy. | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) |
|||||||||
Three Months | |||||||||
Ended |
|||||||||
2017 | 2016 | ||||||||
(in millions, except share and per share data) | |||||||||
Revenues: | |||||||||
Trading gains | $ | 2 | $ | 52 | |||||
Commissions and execution fees | 154 | 166 | |||||||
Interest income | 177 | 145 | |||||||
Other income | 76 | 144 | |||||||
Total revenues | 409 | 507 | |||||||
Interest expense | 35 | 18 | |||||||
Total net revenues | 374 | 489 | |||||||
Non-interest expenses: | |||||||||
Execution and clearing | 61 | 62 | |||||||
Employee compensation and benefits | 62 | 58 | |||||||
Occupancy, depreciation and amortization | 13 | 12 | |||||||
Communications | 8 | 7 | |||||||
General and administrative | 16 | 13 | |||||||
Customer bad debt | 1 | – | |||||||
Total non-interest expenses | 161 | 152 | |||||||
Income before income taxes | 213 | 337 | |||||||
Income tax expense | 18 | 27 | |||||||
Net income | 195 | 310 | |||||||
Net income attributable to noncontrolling interests | 171 | 277 | |||||||
Net income available for common stockholders | $ | 24 | $ | 33 | |||||
Earnings per share: | |||||||||
Basic | $ | 0.35 | $ | 0.52 | |||||
Diluted | $ | 0.34 | $ | 0.51 | |||||
Weighted average common shares outstanding: | |||||||||
Basic | 67,985,107 | 63,985,477 | |||||||
Diluted | 69,157,614 | 65,255,903 | |||||||
Comprehensive income: | |||||||||
Net income available for common stockholders | $ | 24 | $ | 33 | |||||
Other comprehensive income: | |||||||||
Cumulative translation adjustment, before income taxes | 4 | 6 | |||||||
Income taxes related to items of other comprehensive income | – | – | |||||||
Other comprehensive income, net of tax | 4 | 6 | |||||||
Comprehensive income available for common stockholders | $ | 28 | $ | 39 | |||||
Comprehensive income attributable to noncontrolling interests: | |||||||||
Net income attributable to noncontrolling interests | $ | 171 | $ | 277 | |||||
Other comprehensive income – cumulative translation adjustment | 19 | 33 | |||||||
Comprehensive income attributable to noncontrolling interests | $ | 190 | $ | 310 | |||||
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
||||||||||||
2017 |
2016 |
|||||||||||
(in millions) | ||||||||||||
Assets | ||||||||||||
Cash and cash equivalents | $ | 1,656 | $ | 1,925 | ||||||||
Cash and securities – segregated for regulatory purposes | 24,710 | 24,017 | ||||||||||
Securities borrowed | 3,923 | 3,629 | ||||||||||
Securities purchased under agreements to resell | 112 | 111 | ||||||||||
Financial instruments owned, at fair value | 3,023 | 4,037 | ||||||||||
Receivables from customers, net of allowance for doubtful accounts | 21,273 | 19,409 | ||||||||||
Receivables from brokers, dealers and clearing organizations | 1,052 | 1,040 | ||||||||||
Other assets | 508 | 505 | ||||||||||
Total assets | $ | 56,257 | $ | 54,673 | ||||||||
Liabilities and equity | ||||||||||||
Liabilities | ||||||||||||
Short-term borrowings | $ | 38 | $ | 74 | ||||||||
Securities loaned | 3,967 | 4,293 | ||||||||||
Financial instruments sold but not yet purchased, at fair value | 1,366 | 2,145 | ||||||||||
Other payables: | ||||||||||||
Customers | 44,301 | 41,731 | ||||||||||
Brokers, dealers and clearing organizations | 192 | 239 | ||||||||||
Other payables | 383 | 371 | ||||||||||
44,876 | 42,341 | |||||||||||
Total liabilities | 50,247 | 48,853 | ||||||||||
Equity | ||||||||||||
Stockholders’ equity | 997 | 974 | ||||||||||
Noncontrolling interests | 5,013 | 4,846 | ||||||||||
Total equity | 6,010 | 5,820 | ||||||||||
Total liabilities and equity | $ | 56,257 | $ | 54,673 | ||||||||
|
|
|||||||||||
Ownership of |
Interests |
% |
Interests |
% |
||||||||
|
67,991,929 | 16.6% | 67,989,967 | 16.6% | ||||||||
Noncontrolling interests ( |
341,444,304 | 83.4% | 341,444,304 | 83.4% | ||||||||
|
409,436,233 | 100.0% | 409,434,271 | 100.0% | ||||||||
EARNINGS PER SHARE ON COMPREHENSIVE INCOME (UNAUDITED) |
||||||||||
Three Months | ||||||||||
Ended |
||||||||||
2017 | 2016 | |||||||||
(in millions, except share and per share data) | ||||||||||
Comprehensive income available for common stockholders, net of tax | $ | 28 | $ | 39 | ||||||
Comprehensive earnings per share: | ||||||||||
Basic | $ | 0.41 | $ | 0.61 | ||||||
Diluted | $ | 0.40 | $ | 0.60 | ||||||
Weighted average common shares outstanding: | ||||||||||
Basic | 67,985,107 | 63,985,477 | ||||||||
Diluted | 69,157,614 | 65,255,903 | ||||||||
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