Robinhood beats profit estimates on interest income strength
TRADING app Robinhood Markets beat estimates for first-quarter profit, thanks to strong trading volumes and rate hikes that boosted its net interest revenue and sent shares up about 6 per cent after the bell on Wednesday (May 8).
Hopes of a soft landing have encouraged retail traders to wade back into the market, allowing the Menlo Park, California-based company to rake in 59 per cent higher transaction-based revenue.
The momentum has continued in the second quarter despite some uncertainty around the timing of rate cuts by the Federal Reserve, chief financial officer Jason Warnick said.
The company’s net interest revenue jumped 22 per cent to US$254 million, helped by the Federal Reserve’s policy tightening that has allowed companies to earn more from their cash deposits and portfolio of bond investments.
Rate hikes also let brokers like Robinhood, which allow traders to borrow against their investments, charge higher interest on such loans.
The company reported a profit of US$157 million or 18 US cents per share for the three months ended Mar 31, compared with expectations of six cents per share, according to LSEG. It had reported a loss of US$511 million or 57 US cents per share in the same quarter last year.
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Net revenues soared 40 per cent to US$618 million.
‘Disappointed’ with Wells notice
The company’s US crypto trading arm received a so-called Wells notice from the Securities and Exchange Commission (SEC) over tokens traded on its platform, it disclosed earlier this week. The notice is issued when the regulator plans to bring enforcement action against a company.
Robinhood said it was disappointed with the notice but would contest the SEC’s claims and, if necessary, fight the regulator in court.
“We’ve run our crypto business very carefully. We’ve been very selective about the coins we offer, and we’ve not offered services that have been criticised by the SEC,” Warnick said. REUTERS
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