# Interactive Brokers (IBKR) Financial Model Free Excel 3-statement financial model and company analysis for Interactive Brokers. - Canonical: https://finamodel.com/companies/interactive-brokers - Industry: Capital Markets - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/IBKR.xlsx ## Model Purpose This model forecasts earnings, regulatory capital, and equity valuation for Interactive Brokers Group, Inc. (IBKR) to help an equity research analyst determine the stock's fair value and sensitivity to macroeconomic drivers, specifically central bank interest rates and retail/institutional trading volumes. ## Company Overview Interactive Brokers Group, Inc. operates as an automated global electronic broker, executing, clearing, and settling trades across equities, options, futures, foreign exchange, and fixed income. The company provides a unified platform for individual investors, hedge funds, proprietary trading groups, and financial advisors across more than 160 markets globally. - **Business segments:** The company operates as a single reportable segment: Electronic Brokerage. Revenue is primarily split between Net Interest Income (~58%), Commissions (~34%), and Other Income (~8%). - **Key geographies:** Global operations, though the US remains the largest market for customer equity and regulatory capital. - **Business model type:** Asset-light, highly scalable technology platform with massive operating leverage. - **Competitive position:** Low-cost leader in the brokerage industry, known for deep market access, high execution quality, and low margin lending rates. Key peers include Charles Schwab and Robinhood. - **Recent major events:** A 4-for-1 forward stock split was effected in the form of a stock dividend on 17 June 2025. The company surpassed 4.4 million customer accounts and $203 billion in total assets by the end of 2025, while launching new AI tools and crypto funding capabilities. ## Revenue Deep Dive ### Commissions - **Segment name:** Commissions - **Revenue driver formula:** `Total DARTs (Daily Average Revenue Trades) x Trading Days in Period x Average Commission per DART` - **Historical growth rate:** 20-30% YoY (reached $2.1 billion in 2025, up 27% YoY). - **Key growth levers and headwinds:** Driven by net new account growth (up 32% in 2025) and market volatility. Headwinds include prolonged low-volatility environments. - **Pricing dynamics:** Highly competitive, volume-tiered pricing. The company does not rely on Payment for Order Flow (PFOF) for its PRO clients, charging transparent commissions instead. - **Seasonality:** Q1 is typically the strongest quarter due to tax-season trading and beginning-of-year portfolio rebalancing. ### Net Interest Income (NII) - **Segment name:** Net Interest Income - **Revenue driver formula:** `(Average Margin Loans x Margin Yield) + (Average Segregated Cash x Cash Yield) + (Securities Lending Balances x Sec Lending Yield) - (Average Customer Credit Balances x Interest Paid Rate)` - **Historical growth rate:** Highly variable based on the interest rate cycle; grew 20% YoY in Q4 2025 to $966 million. - **Key growth levers and headwinds:** Directly correlated with central bank benchmark rates (e.g., Fed Funds Rate) and customer appetite for leverage (margin loans reached $90.2 billion in 2025). - **Pricing dynamics:** IBKR pays interest on idle cash balances (above a threshold) and charges benchmark-plus rates on margin loans, maintaining a relatively stable net interest margin spread. ### Other Income - **Segment name:** Other Income - **Revenue driver formula:** `Execution and Clearing Fees + Mark-to-Market on GLOBALs + Payment for Order Flow (Lite clients)` - **Historical growth rate:** Volatile; can swing significantly due to currency movements. - **Pricing dynamics:** The company holds its equity in a basket of 10 major currencies called "GLOBALs" to diversify currency risk; mark-to-market fluctuations run through this line item. ## Cost Structure ### Variable Costs / COGS - **Line items:** Execution, clearing, and distribution fees. - **Gross margin range:** Not typically measured via gross margin; instead, execution costs are viewed as direct offsets to trading revenue. Execution expenses typically run at 15-20% of gross commission revenue. - **Key input costs:** Exchange fees, regulatory fees (e.g., SEC Section 31 fees), and clearinghouse fees. ### Operating Expenses - **Employee compensation and benefits:** The largest fixed cost, though highly scalable. Headcount grows at a fraction of the rate of account growth due to extreme automation. - **Technology, communications, and equipment:** Costs for data centres, server maintenance, and market data feeds. - **General and administrative:** Legal, regulatory, and advertising expenses. - **Stock-Based Compensation:** Minimal relative to tech peers, as the founder holds a massive economic interest and compensation is largely cash-based. ### Margin Profile - **Pretax Margin:** Exceptionally high, ranging from 70% to 79% (hit 79% in Q4 2025). - **Margin trend:** Expanding. Because the platform is fully built and automated, incremental revenue (especially NII and new account commissions) drops almost entirely to the bottom line. ## Balance Sheet Structure - **Total assets:** ~$203.2 billion (as of year-end 2025). - **Key asset categories:** - Cash and securities segregated for regulatory purposes (the largest asset, representing customer cash held safely). - Customer margin loans (~$90.2 billion). - Securities borrowed. - **Working capital profile:** Traditional working capital metrics (DSO, DIO, DPO) are irrelevant for a broker-dealer. Liquidity is measured by regulatory net capital and the ability to fund daily clearinghouse margin requirements. - **PP&E:** Minimal. Consists mostly of server hardware and office leases. - **Goodwill & intangibles:** Negligible, as IBKR is an organic grower, not a serial acquirer. ## Capital Expenditure & Investment - **Capex as % of revenue:** Less than 1-2%. - **Maintenance vs. growth:** Almost entirely maintenance and capacity upgrades for data centres. - **Capitalised software:** The company expenses the vast majority of its software development costs through compensation. - **M&A pattern:** Strictly organic growth. The company builds proprietary technology rather than buying it. ## Debt & Capital Structure - **Total debt:** Minimal traditional corporate debt. Liabilities are primarily customer-driven (Customer credit balances of ~$160.1 billion and Securities loaned). - **Credit rating:** Investment grade (Standard & Poor's: BBB+ / A-). - **Share structure:** Dual-class. Class A shares are publicly traded. Class B shares are held by IBG Holdings LLC (Thomas Peterffy and employees), representing the vast majority (~75%+) of the economic interest. - **Dividend policy:** The company pays a regular quarterly dividend of $0.08 per share (post-2025 stock split), representing a very low payout ratio. Capital is primarily retained to support margin lending and regulatory capital requirements. ## Cash Flow Characteristics - **Operating cash flow conversion:** Highly distorted by customer activity. An increase in customer cash deposits increases OCF, while an increase in customer margin borrowing decreases OCF. - **Free cash flow margin:** Traditional FCF is not a useful metric. Analysts focus on "Distributable Earnings" or Net Income attributable to common stockholders. - **Major non-cash items:** Mark-to-market on the GLOBALs currency basket and deferred tax assets related to the step-up in tax basis when IBG Holdings exchanges shares. - **Cash tax rate:** The effective tax rate is typically around 18-20%, benefiting from the partnership structure of the operating LLC. ## Sheet Structure 1. **Assumptions** - Macro drivers (Fed Funds rate, market volatility). - Operating metrics (Account growth, DARTs per account, average margin loan per account). 2. **Monthly Metrics Build** - Replicates the company's monthly reported brokerage metrics (Accounts, DARTs, Client Equity, Margin Balances). 3. **Revenue Schedule** - Commission build (DARTs x Rate). - NII build (Average Balances x Yields). 4. **Income Statement** - Consolidated view. - Non-controlling interest deduction (critical for isolating Class A EPS). 5. **Balance Sheet** - Broker-dealer format (Segregated cash, margin loans, customer payables). 6. **Cash Flow Statement** - Indirect method, separating operating cash flows from customer balance swings. 7. **Regulatory Capital** - Simplified calculation of consolidated equity capital vs. regulatory requirements. 8. **Valuation** - Sum-of-the-parts or P/E multiple valuation based on Class A EPS. ## Key Financial Relationships 1. `Ending Customer Accounts = Beginning Customer Accounts x (1 + Account Growth Rate)` 2. `Total DARTs = Average Customer Accounts x DARTs per Account per Day x Trading Days` 3. `Commission Revenue = Total DARTs x Average Commission per DART` 4. `Average Margin Loans = (Beginning Margin Loans + Ending Margin Loans) / 2` 5. `Margin Interest Income = Average Margin Loans x (Benchmark Rate + Margin Spread)` 6. `Average Customer Credits = (Beginning Customer Credits + Ending Customer Credits) / 2` 7. `Interest on Segregated Cash = Average Customer Credits x (Benchmark Rate - Cash Spread)` 8. `Net Interest Income = Margin Interest Income + Interest on Segregated Cash + Securities Lending Income - Interest Expense on Customer Balances` 9. `Execution and Clearing Expenses = Commission Revenue x Execution Expense Margin (~15-18%)` 10. `Pretax Income = Total Net Revenues - Execution/Clearing Expenses - Compensation - Tech/Comm - G&A` 11. `Net Income Attributable to IBG, Inc. = Consolidated Net Income x (Class A Shares / Total Outstanding Shares including Class B)` 12. `Class A EPS = Net Income Attributable to IBG, Inc. / Diluted Class A Shares Outstanding` ## Cross-Sheet Dependencies - The **Assumptions** sheet drives the **Monthly Metrics Build** (accounts, DARTs, balances). - The **Monthly Metrics Build** aggregates into quarterly/annual averages, feeding the **Revenue Schedule**. - The **Revenue Schedule** feeds the top line of the **Income Statement**. - The **Income Statement** generates Net Income, which feeds Retained Earnings on the **Balance Sheet**. - The **Balance Sheet** ending balances for Margin Loans and Customer Credits feed back into the **Revenue Schedule** to calculate NII. *(Note: To prevent circularity, use prior-period ending balances or a dedicated average balance schedule that does not reference current-period net income).* - The **Income Statement** non-controlling interest line relies on the share count ratio defined in the **Assumptions** sheet. ## Sign Convention - **Revenues and Expenses:** Both entered as positive numbers in their respective build schedules. Expenses are subtracted in the Income Statement totals. - **Balance Sheet:** Assets are positive. Liabilities and Equity are positive. - **Cash Flow:** Cash inflows (e.g., increase in customer credit balances) are positive. Cash outflows (e.g., increase in margin loans) are negative. ## Things Most Likely to Go Wrong - **Ignoring the Up-C Structure:** IBKR operates under an Up-C structure. Consolidated Net Income includes earnings attributable to the founder's LLC. You must deduct the Non-Controlling Interest to arrive at Net Income available to Class A shareholders. - **Stock Split Mismatch:** The company executed a 4-for-1 stock split in June 2025. Historical per-share data (EPS, dividends, share counts) must be retroactively adjusted to prevent massive YoY growth errors. - **NII Circularity:** Calculating interest income based on current period cash balances, which are driven by current period net income, will cause an Excel circular reference. Use beginning-of-period balances for interest calculations. - **Misinterpreting Cash Flows:** A massive negative operating cash flow often means the company is growing rapidly (issuing more margin loans to customers). It is not a sign of financial distress. - **Currency Translation Noise:** The "Other Income" line includes mark-to-market changes on the GLOBALs currency basket. Do not forecast this as a linear growth item; hold it flat at zero for future periods to avoid embedding currency speculation into the model. - **Treating Customer Cash as Corporate Cash:** The $160+ billion in customer credits is a liability. It cannot be used for corporate dividends or M&A. It must be segregated or invested in strict accordance with broker-dealer regulations. ## Validation Checks - **Pretax Margin Check:** Pretax margin should consistently remain between 70% and 80%. Flag if it drops below 70%. - **Balance Sheet Check:** Total Assets must exactly equal Total Liabilities + Equity. - **NII Sensitivity Check:** A 100 bps increase in the benchmark interest rate should result in a disproportionate increase in NII, as the company does not pass 100% of rate hikes to customer cash accounts. - **Account Growth vs. Opex Check:** Account growth of 25-30% should only trigger mid-single-digit growth in compensation expenses, reflecting the platform's operating leverage. - **EPS Reconciliation:** Ensure forecasted EPS matches the Class A share count, not the total consolidated share count. ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | Customer Account Growth | 25.0 | % YoY | Conservative deceleration from 32% growth in 2025. | | DARTs per Account per Day | 0.0038 | Trades | Based on historical averages and Q4 2025 run-rate. | | Average Commission per DART | 2.85 | USD | Stable pricing dynamic based on 2024/2025 actuals. | | Margin Loan Growth | 20.0 | % YoY | Assumes continued strong retail/institutional leverage appetite (grew 40% in 2025). | | Benchmark Interest Rate | 4.50 | % | Assumed average central bank rate for the forecast period. | | Execution & Clearing Expense | 16.0 | % of Commissions | Historical average for direct trading costs. | | Compensation Expense Growth | 8.0 | % YoY | Headcount grows significantly slower than account volume. | | Pretax Margin Target | 78.0 | % | Aligns with 79% achieved in Q4 2025. | | Effective Tax Rate | 19.0 | % | Historical average reflecting the partnership tax structure. | | Class A Share Count | 108.8 | Millions | Actual Class A shares outstanding (post-split adjustment). | | Total Shares (Class A + B) | 445.2 | Millions | Total economic shares outstanding for enterprise valuation. | | Quarterly Dividend | 0.08 | USD/Share | Declared Q4 2025 dividend (post-split). | ## Data Sources & Benchmarks - **Filings:** SEC EDGAR (10-K, 10-Q) and Interactive Brokers Investor Relations page. - **Monthly Data:** IBKR publishes "Electronic Brokerage Monthly Performance Metrics" which are essential for tracking DARTs, accounts, and balances intra-quarter. - **Peers for Benchmarking:** Charles Schwab (SCHW), Robinhood (HOOD), Tradeweb (TW), and Virtu Financial (VIRT). - **Consensus Estimates:** Bloomberg or FactSet for forward EPS and NII estimates. - **Macro Data:** Federal Reserve Economic Data (FRED) for Fed Funds rate projections. ## Sources - Interactive Brokers Group Q4 2025 Earnings Release (20 January 2026) - Interactive Brokers Group 2025 Monthly Brokerage Metrics - Interactive Brokers Group SEC Form 10-Q (August 2025) - Interactive Brokers Group 2025 Proxy Statement --- ## Frequently asked questions ### What is Interactive Brokers and what services does it provide? Interactive Brokers Group, Inc. operates as an automated global electronic broker, facilitating trades across various asset classes like equities, options, futures, and foreign exchange. It offers a unified platform for individual investors, hedge funds, and financial advisors across over 160 global markets. ### How does Interactive Brokers generate its revenue? Interactive Brokers' revenue is primarily driven by Net Interest Income, which accounts for approximately 58% of its total revenue. Commissions contribute about 34%, with the remaining portion coming from Other Income sources. ### What are Interactive Brokers' capital expenditure assumptions in a financial model? In a financial model, Interactive Brokers' capital expenditure (Capex) is assumed to be a very small percentage of revenue, typically less than 1-2%. This reflects its asset-light business model, where capex is almost entirely for maintenance and capacity upgrades for data centers. ### What are the key assumptions for revenue growth and profitability in an Interactive Brokers financial model? A financial model for Interactive Brokers assumes a revenue growth rate of approximately 16.4% and a COGS as a percentage of revenue around 55%. Selling, General, and Administrative (SGA) expenses are modeled at about 12.3% of revenue, reflecting the company's highly scalable technology platform. ### What macroeconomic factors influence Interactive Brokers' valuation? Interactive Brokers' valuation is significantly influenced by macroeconomic drivers such as central bank interest rates, which impact its Net Interest Income, and retail/institutional trading volumes, which affect its commission revenue. The model helps assess the stock's fair value and its sensitivity to these factors. ### Can I download an Excel financial model for Interactive Brokers (IBKR)? Yes, an Excel financial model for Interactive Brokers (IBKR) is available for download. This model forecasts earnings, regulatory capital, and equity valuation, with a forecast horizon extending from FY2026 to FY2030. [Interactive forecast calculator](https://finamodel.com/companies/interactive-brokers/forecast)