Written by Shri Hari NS and Niket Nishant
(Reuters) – Online brokerage Robinhood Markets on Wednesday reported better-than-expected first-quarter profit thanks to strong crypto trading volumes and a rate hike that boosted net interest income.
The approval of the first spot Bitcoin ETF in the United States in January fueled sentiment against the crypto industry, which has been marred by several high-profile busts over the past two years.
However, the company revealed earlier this week that its U.S. crypto trading arm had received a so-called wells notice from the SEC over tokens traded on its platform.
This notice is issued when a regulator plans to take enforcement action against a company.
“The Wells notice clouds the future of this revenue stream,” said Lauren Ashcraft, a financial services analyst at eMarketer.
However, he added that Robinhood “still has the potential to retain this important revenue stream” because companies generally have an opportunity to respond to Wells notices and rectify the situation.
Robinhood said it was disappointed by the notice, but it disputes the SEC's claims and intends to fight the regulator in court if necessary.
Chief Financial Officer Jason Wernick said, “We have run our cryptocurrency business very carefully. We are very selective about the coins we offer, and we do not offer services that would be criticized by the SEC. “I haven't.”
Solid trading in options and stocks
Stock and options trading also held up thanks to hopes of a soft landing, prompting retail traders to re-enter the market and helping the Menlo Park, Calif.-based company earn 59% more on a trading basis. did it.
Wernick said momentum continued in the second quarter despite uncertainty over the timing of the Federal Reserve's interest rate cuts.
Net interest income rose 22% to $254 million, helped by tighter Federal Reserve policy that allowed companies to earn more from deposits and bond investments.
The rate hike would also allow brokers like Robinhood, which allow traders to borrow to match their investments, to charge higher interest rates on such loans.
LSEG said the company reported profit of $157 million, or 18 cents a share, for the three months ended March 31, compared with expectations of 6 cents a share. The company posted a loss of $511 million, or 57 cents per share, in the same period last year.
Net revenue increased 40% to $618 million. After the bell, the stock rose nearly 3%.
(Reporting by Sri Hari NS and Niket Nishant in Bengaluru; Editing by Tasim Zahid)
