Robinhood posts smaller-than-expected loss; shares rise

ROBINHOOD posted a smaller-than-expected quarterly loss as the brokerage’s margin trading business benefited from rising interest rates, while increased volatility in the markets helped its equities and options segments.

Shares of the Menlo Park, California-based company were up 5 per cent in extended trading on Wednesday (Nov 2).

Net interest revenue from its margin investing business doubled to US$128 million, as the company benefited from a series of big interest rate hikes.

Annual margin interest rates have jumped to 5.75 per cent for Robinhood Gold customers and 9.75 per cent for non-Gold customers. Robinhood Gold is the company’s subscription service, which gives investors access to premium features.

Trading in options rose 10 per cent, while that in equities was up 7 per cent sequentially as investors repositioned their portfolios to take advantage of rising interest rates.

Those factors helped the company post revenue of US$361 million in the three months ended September, comfortably beating estimates of US$355 million, while narrowing its net loss to US$175 million from US$1.32 billion a year earlier.

Stripping off one-time items, Robinhood reported a loss of 20 US cents a share, narrower than 31 US cents estimated by analysts, according to data from Refinitiv IBES.

Robinhood is one of many fintech upstarts that were slammed by a broader market decline as investors shunned speculative assets.

As a result, trading in cryptocurrencies fell 12 per cent sequentially to US$51 million. It had surged 860 per cent to US$51 million a year earlier.

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The commission-free brokerage also saw monthly active users fall to 12.2 million, sequentially.

A year ago, it reported 18.9 million users when Robinhood’s easy-to-use interface made it a hit among young investors trading from home on cryptocurrencies and stocks such as GameStop Corp amid the Covid-19 pandemic. REUTERS