Interactive Brokers Group Inc. (NASDAQ:IBKR) delivered a stronger-than-expected performance in the third quarter, fueled by robust securities lending activity that boosted net interest income.
Following the earnings release, Keefe, Bruyette & Woods (KBW) analyst Kyle Voigt maintained a Market Perform rating on Interactive Brokers with a $72 price forecast.
KBW highlighted that IBKR reported adjusted earnings of 57 cents per share, surpassing both KBW’s 54-cent estimate and the consensus by three cents.
Also Read: What’s Going On With Interactive Brokers Stock Today?
The upside was driven primarily by higher net interest income and lower expenses, partially offset by an elevated tax rate.
The company’s adjusted results exclude a $4 million impact from its currency diversification strategy and a $41 million mark-to-market adjustment on investments.
Net Interest Income and Securities Lending Surge
Net interest income rose to $967 million, well above KBW’s $922 million forecast and consensus of $908 million, supported by securities lending revenue of $133 million—nearly double KBW’s $69 million estimate.
Overall, adjusted net revenues totaled $1.61 billion, exceeding KBW’s $1.56 billion estimate and the $1.53 billion consensus, underscoring the contribution of heightened lending activity.
Expense Management and Margin Expansion
Expenses remained tightly controlled, with total adjusted costs of $343 million, well below KBW’s $379 million projection.
Execution and clearing expenses fell to $92 million versus KBW’s $123 million estimate, benefiting from the removal of Section 31 fees and higher liquidity rebates amid elevated trading volumes.
Pre-tax operating margins expanded to 78.7%, ahead of KBW’s 75.7% forecast.
KBW’s $72 price target implies a valuation of roughly 32 times the firm’s discounted 2027 EPS estimate.
The firm cautioned that the price forecast is sensitive to shifts in earnings expectations, which are influenced by interest rate trends, broader macroeconomic conditions, and the company’s operational performance.
Price Action: IBKR shares were trading lower by 2.99% to $66.47 at last check Friday.
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