Interactive Brokers down on prior year, despite liquid balance sheets and securities lending success

Interactive Brokers, the global broker dealer and proprietary trading business, has announced earnings 87.8% down on the same quarter last year.

These results, plus poor fourth quarter earnings of 6 cents per share, are reportedly due to competitive pressure on spreads and constrained liquidity in the market as a whole.

Zacks, the investment research company, has estimated a gain of USD 1.19 per share for 2010, a substantial improvement from 2009, but significantly lower than the USD 2.24 per share in 2008.

Whilst this indicates a potential downward pressure of performance, the stock remains short term a “strong sell” according to Zacks. Long term, it is however, classed as “neutral”.

All this aside, Interactive Brokers Group has continued to maintain a highly liquid balance sheet, with low leverage and a strong capital position. It also maintained significant borrowing facilities through the securities lending markets and banks.

Though the company’s fundamentals are strong- it has the luxury of lower barriers to entry and significant international exposure - the ongoing weakness in equity markets is likely to impact profitability in the upcoming quarters.