(Reuters) -Robinhood Markets posted a surprise profit in the fourth quarter on Tuesday, driven by higher interest income from customers paying back loans and a rebound in trading, sending shares of the online brokerage up 10% after the bell.
A higher-for-longer interest rate environment has benefited lenders across the financial spectrum, including Robinhood, with the industry capitalizing on interest payments.
The retail-investor focused firm reported a surprise profit of 3 cents per share in the quarter, compared with analysts’ expectations of a loss of 1 cent, according to LSEG data.
The Menlo Park, California-based company’s net interest revenue came in at $236 million, up from $167 million a year earlier.
The financial services platform allows eligible customers to borrow money to purchase securities and charges interest on the debt. This ‘margin investing,’ has been a bright spot for retail investor-focused firm in recent quarters amid a deceleration in retail trading.
Transaction-based revenues outperfomed Wall Street expectations, growing 8% year-over-year to $200 million in the quarter, primarily driven by cryptocurrencies.
Robinhood was at the center of the 2021 retail trading frenzy, driven by mom-and-pop investors who used the company’s commission-free platform to pump money into so-called “meme stocks” during the pandemic-era lockdowns.
The company has been trying to diversify its business to reduce dependence on transaction-based revenues and more towards product offerings and margin investing.
“2023 was a strong year as our product velocity continued to accelerate, our trading market share increased, and we started to expand globally,” said CEO Vlad Tenev in a statement.
Average revenue per user (ARPU) increased 23% year-over-year to $81, while monthly active users (MAU) declined 4% to 10.9 million in the reported quarter.
The company’s revenue rose to $471 million, sailing past expectations of $456.81 million.
(Reporting by Manya Saini in Bengaluru; Editing by Tasim Zahid and Shinjini Ganguli)
