Interactive Brokers Is Holding $930 Billion of Customer Money. Here’s What That Earns at Today’s Rates.

The financial world changed when the Federal Reserve began raising interest rates in 2022 to combat inflation. Some firms — like the now-shuttered Silicon Valley Bank — were ill-prepared for this interest rate rise. Others, like Interactive Brokers (IBKR -4.00%), had balance sheets ready to capitalize on rising rates.

Last quarter, IBKR’s customer equity rose 40% to $930 billion, making it one of the fastest-growing brokerages in the world by asset value. Here’s how it can capitalize on today’s interest rates to generate earnings for shareholders.

Interactive Brokers Group

Today’s Change

(-4.00%) $-3.77

Current Price

$90.56

Key Data Points

Market Cap

$163BMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.

Day’s Range

$90.42 – $93.22

52wk Range

$58.95 – $97.84

Volume

2.6M

Avg Vol

5M

Gross Margin

95.31%

Dividend Yield

0.36%

Exploding net interest income

As a brokerage, IBKR earns interest income in a few ways. First, it can invest idle cash balances in short-term Treasury bonds, sharing some of the proceeds with customers before pocketing the rest. Second, it earns interest income by making margin loans to customers, backed by customers’ equity, as well as short-sale loans.

Even though IBKR offers strong profit sharing on idle cash and low-margin loans compared to the competition, it is still printing gobs of interest income at today’s interest rates. Its net interest income rose from $1.148 billion in 2021 to $3.56 billion in 2025, driven by growing customer account balances and rising interest rates, which allowed it to earn more per customer.

Last quarter, net interest income was $1.06 billion, up 23% year over year. It is actually the largest revenue segment for IBKR.

Image source: Getty Images.

Balancing long-term growth

IBKR’s stock price went up by 500% in the last five years, much of which is due to the explosion in net interest income feeding through to the bottom line. For any shareholder today, there is a risk that this tailwind over the last few years will turn into a headwind if interest rates fall.

At the same time, IBKR has a fantastic growth opportunity to attract more customers to its platform, which can offset any interest-income headwinds. Total customers grew 34% year over year last quarter to 5.19 million, with daily active revenue trades (DARTs) up 36%. Commission revenue grew 30% year over year to $673 million, which is highly correlated with customer and DART growth.

With its superior global trading platform, IBKR should steadily attract new customers in the years ahead. However, the company is currently trading at an elevated valuation, with a price-to-earnings ratio (P/E) of 37 in a time when interest income may be higher than normal. For this reason, investors should avoid buying IBKR stock for the time being.