Interactive Brokers Sees $81M Boost from Fed Rate Hike

The Federal Reserve raised its benchmark interest rate by a quarter point on September 16th, marking its first increase since July 2023. The move is expected to contribute about $81 million per year to Interactive Brokers' net interest income.

Interactive Brokers earns interest on customers' idle cash and margin loans, with the company estimating that a 0.25% rise in U.S. dollar rates adds around $81 million annually to its net interest income. The estimate is based on maturing investments rolling over at the new higher rates.

The company's net interest income grew 23% year-over-year in the second quarter, despite lower benchmark rates. This growth was driven by an increase in customers' balances, with average customer credit balances climbing by $41.7 billion and margin loans growing by $35.7 billion over the past year.

The Fed's rate hike is a relatively modest contribution to Interactive Brokers' revenue, which totaled $1.06 billion in the second quarter. The company's growth has been driven primarily by balance growth, with net interest income increasing 23% despite falling rates.