Interactive Brokers Group Inc at Bank of America Financial Services Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Craig Siegenthaler - BofA Securities - Analyst : Maybe we can start with the macroeconomic setup. So right now, it looks like pretty close to a Goldilocks scenario. Interest rates are high, which is benefiting on your cash sweep revenues. Client engagement is also very high. What do you think of the macro backdrop today?

Question: Craig Siegenthaler - BofA Securities - Analyst : So on the prospects for a good macro environment, there is the potential for significant increases in tariffs. Many considered tariffs inflationary and not good for economic growth. How do you think tariffs are going to impact the economy and potentially client engagement at IBKR?

Question: Craig Siegenthaler - BofA Securities - Analyst : So you are in favor there. The regulatory backdrop is looking a lot lighter in the next couple of years. That's a good thing for brokers. We were dealing with an SEC equity market structure proposal under the prior leadership. Prospects are now that this will get watered down. What are you expecting from that? The SEC overall? And also anything with crypto that helps crypto adoption?

Question: Craig Siegenthaler - BofA Securities - Analyst : So I'm not as focused on the international regulatory environment, as I'm sure you are, given the business is so global. But are there any international initiatives in Asia, Hong Kong, Singapore and Europe that we should be thinking about?

Question: Craig Siegenthaler - BofA Securities - Analyst : Given the strength of the US stock market, we're seeing high demand for US assets across the board-- retail channel, institutional channel. Now you have a very international business where you're headquartered in the US, and you have a lot of US capabilities. And in these international markets, whether it's Asia, we have several large competitors, Brazil, you have a large competitor, but you are still viewed more of the American US firm. How has this benefited you?

Question: Craig Siegenthaler - BofA Securities - Analyst : So that was sort of broad. I wanted to focus more on the introducing broker channel. With foreign investors wanting to buy US assets, I think that puts you in a great position to win more i-brokers here. So what are you seeing from financial institutions across Asia, in Brazil, in Europe that don't have the capabilities or they're not very good, and they can simply white label IBKR services.

Question: Craig Siegenthaler - BofA Securities - Analyst : So let's talk about long-term growth. Account growth is accelerated. I think it's a hair above 30% right now. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 6:50PM, IBKR.OQ - Interactive Brokers Group Inc at Bank of America Financial Services Conference

Question: Craig Siegenthaler - BofA Securities - Analyst : Got it. So that's pretty quick. What do you think is driving your fast growth, which is much faster than all the brokers that I cover. And if I think about

Question: Craig Siegenthaler - BofA Securities - Analyst : So 30% is very fast. One pushback that I hear and probably Nancy may hear it too, is there's an underlying mix towards smaller, less active accounts. What is your perspective on that mix?

Question: Craig Siegenthaler - BofA Securities - Analyst : Okay. That's AUC or size or client equity is the terminology you use?

Question: Craig Siegenthaler - BofA Securities - Analyst : How about activity in terms of margin loan usage, in terms of trading activity rates over some time period or if there are smaller accounts, there's higher accretion on net interest income if more of them have smaller cash balances.

Question: Craig Siegenthaler - BofA Securities - Analyst : All your geographies and client channels are growing. And I know there's kind of maybe 3 major ways of looking at it. But are any of the geographies or clients...

Question: Craig Siegenthaler - BofA Securities - Analyst : Understand, respect that. ForecastEx, this was very exciting around the election. It emerged very quickly. It's something you can also white-label to third parties. Now we don't get -- we only have presidential elections in the US every 4 years. So maybe talk about this business, what else you can do with this? Can this work around the world and other elections? What do you plan with that business?

Question: Craig Siegenthaler - BofA Securities - Analyst : Thomas, when I travel around the world, it seems like you're in every major economy. Is there any country that you're...

Question: Craig Siegenthaler - BofA Securities - Analyst : Other than maybe Iran or maybe North Korea, is there any other country you like to expand? Argentina?

Question: Craig Siegenthaler - BofA Securities - Analyst : Okay. In terms of the product offering, though, do you do hedge fund prime in Hong Kong? Is there capabilities that you can expand more into different regions?

Question: Craig Siegenthaler - BofA Securities - Analyst : If I look at trends like margin loan growth, trading activity rates. We're not exactly at the 1Q '21 peak level, but we're at very healthy levels today and the bull market is fueling that. Do you view this, sort of as a cyclical peak? Or do you think we can generally get more upside as the bull market continues with some deregulation?

Question: Craig Siegenthaler - BofA Securities - Analyst : So I wanted to talk about crypto. Given the prospects of continued growth in crypto, especially after the outcome of the November election, are you looking to adjust your offering? And my understanding right now is you're actually leveraging Paxos. But given your technology, R&D effort, maybe you'll use IBKR in the future.

Question: Craig Siegenthaler - BofA Securities - Analyst : What happened 3 weeks ago?

Question: Craig Siegenthaler - BofA Securities - Analyst : Behind the scenes are you using blockchain technology at all?

Question: Craig Siegenthaler - BofA Securities - Analyst : Okay. Do you plan to? No comment?

Question: Craig Siegenthaler - BofA Securities - Analyst : Okay. I want to understand how the competitive landscape in the individual channel has evolved around the world. There's new entrants and bigger players. And I don't know if I want to list a bunch of names, but in places like Europe, Brazil, Asia, especially mainland China, are you seeing the level of competitive intensity pick up? You sort of have a first-mover advantage globally, but if there's more and more competition around the world that might be a headwind.

Question: Craig Siegenthaler - BofA Securities - Analyst : So you launched a new app, GlobalTrader.

Question: Craig Siegenthaler - BofA Securities - Analyst : I want to understand if you plan to make any changes or add capabilities to the app? And is this going to help you reach a younger, maybe less wealthy... So your global trade app, you kind of recently launched it.

Question: Craig Siegenthaler - BofA Securities - Analyst : Why wasn't it good?

Question: Craig Siegenthaler - BofA Securities - Analyst : Are you going to -- is the goal of the app to reach a younger, less wealthy client base? Or is it to supplement your more active individual?

Question: Craig Siegenthaler - BofA Securities - Analyst : When you reset it out there, do you want that to go down market to a young, less sophisticated client base.

Question: Craig Siegenthaler - BofA Securities - Analyst : Now I'm going to move on to the i-broker channel, you announced two large wins. It might be in the summer of '22 or '23. I forget, but one of them, I think we know what it is. It's public. It's a big bank.

Question: Craig Siegenthaler - BofA Securities - Analyst : After that, you stopped talking about them. I wouldn't...

Question: Craig Siegenthaler - BofA Securities - Analyst : In your hedge fund prime business, I think in the league table, you're like number 5 now, right? I think you're about number 5 now, but you rolled out this white-glove service, right? And you have $17 billion of equity capital now, I think. But there's a bunch of things you're doing to try to move up market. How successful has that been?

Question: Craig Siegenthaler - BofA Securities - Analyst : So you heard this in the ICE presentation earlier, but artificial intelligence. How are you using it today if you care to talk about? And what are ways you can use it in the future? One of your competitors in the US have talked about AI-powered financial advisers. What do you think about that too?

Question: Craig Siegenthaler - BofA Securities - Analyst : Now I've asked this in most of my meetings, too, but I think this is a special question for you in that you own so much IBKR stock, and most of my clients do not. So what do you see in the long-term story that you think many of them are missing? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 6:50PM, IBKR.OQ - Interactive Brokers Group Inc at Bank of America Financial Services Conference

Question: Craig Siegenthaler - BofA Securities - Analyst : It felt like you didn't like doing it either?

Question: Craig Siegenthaler - BofA Securities - Analyst : It seemed like you didn't like doing it either.

Question: Craig Siegenthaler - BofA Securities - Analyst : We have time for a couple of questions. Please raise your hand, and we can get you a mic. Unidentified Participant So you said earlier, no one else thinks about the financial performance of the customers. They think about the financial performance of themselves. So I guess what I'm wondering is, you look at how you can automate more and take down your costs in order to lower the cost for your customers. And if you look at the next 5 years or so, what is the opportunity to keep doing that -- to keep lowering your prices and to keep opening the distance with your competitors?

Question: Craig Siegenthaler - BofA Securities - Analyst : You could offer them BofA Research?

Question: Craig Siegenthaler - BofA Securities - Analyst : With that, we are out of time. So Thomas, on behalf of all of us at Bank of America, thank you very much and great seeing you.