Interactive Brokers Chairman Peterffy: 'I get the feeling the market is somewhat exhausted'

Let’s get another check on Interactive Brokers. It’s about even slightly higher right now and overtime after beating estimates on the top and bottom lines. Joining us now for an exclusive interview is Thomas Petroffi, Founder and Chairman at Interactive Brokers. Thomas, good to see you. So tell me how much did higher rates actually help when I’m looking at net interest income here and also customers willingness to to get out there in risk and then do some margin trading. Well we had a we had a terrific quarter. Our revenues are all time high over $1.2 billion and our pre tax profits are also at all time high at 879,000,000 has adjusted it’s up 22% year on year and our pre tax profit margins were 72% which is quite high in the industry, it’s probably the highest. So the earnings were one point six, $1.61 a share adjusted at 1.64 cents and so it was a fantastic quarter. As far as Commission revenues they were increased by 7% and interest revenues as you said increased by 17%. So it’s it’s it’s been a great quarter. Yeah. But then specifically on the customer margin loans, the credit balances, what sort of behavior are you seeing from your customers when it comes to risk in these markets where people seem to to be excited about the the continuing strength in the economy and what that suggests for equity. Yeah, so, so margin loans, you may think of this as a warning sign. Margin loans were up 30% at $51.2 billion which is an all time high and that usually is, you know it’s usually 4000 a market that is going to slow down. And so that’s what we’re probably going to be seeing. Average number of trades were 2.35 million trades a day, which is very high and customer accounts grew up, grew up 25% and their customer equity goes up 36%, but that is of course at the end of the quarter. So since that time, we have seen a downturn in the market. So these numbers right now would be somewhat lower. OK. That’s kind of exactly where I was going to go with you, Thomas. And that is the fact that you saw 25% growth in customer accounts and you’ve seen strong growth for for recent quarters in general. So I do wonder how sustainable it is at these levels. Yeah, but I’m not saying that customer account growth is going to go down, it’s probably will not. But as far as I can’t, equity that fluctuates with the market and margin loans usually go down. Although this time even though the market has been down for several days this week and last week, margin loans hasn’t get really come down much, just barely. How are you thinking about the portfolio? I know you recently rolled out this high touch prime brokerage and global outsourced trading. You’ve been expanding your product offerings in general. You’ve also in the past talked about being acquisitive and the possibility of M&A, is that still on the table? Well, that is on the table, but you know we don’t see anything that a reasonable price yet, but should the market really go down, I think opportunities will emerge. So if you have a lot of cash on on your hands that’s that’s always a good situation to be in. I want to go back to what you said about this level of margin trading being a bit toppy. How does this compare to what we saw a couple years ago when the market was a bit toppy? Why do you think what are the other signals that you’re seeing that suggests to you that we might be in for a breather or a sustained dip in what equities do? So I generally get the feeling that the market is somewhat exhausted, margin loans keep rising and that’s never a a bullish sign. And so we we saw that two years ago margin loans hit a hit a high and all time high right before the market collapsed. So that’s it possibility, although I think that on the long run the market is going to rise because I think inflation is going to rise and I don’t think interest rates will come down much. They may come down a little bit, but I think 5% looking forward is probably a good guess. So no landing camp it sounds like you’re in that’s that’s right. That’s definitely.