Robinhood’s losses narrow as higher rates boost margin trading business

Nov 2 (Reuters) – Robinhood Inc (HOOD.O) reported a smaller-than-expected quarterly loss on Wednesday as the brokerage’s margin trading business benefited from rising interest rates, while heightened market volatility helped its stocks and options units.

Net interest income doubled to $128 million in the third quarter, and the annual margin rate jumped to 5.75% for Robinhood Gold customers and 9.75% for non-Gold customers.

Robinhood Gold is the company’s subscription service that gives investors access to advanced features.

“We expect fourth-quarter net interest income to be approximately $25 million higher than the third quarter,” Chief Financial Officer Jason Wernick said on a post-earnings conference call.

Options volume rose 10%, while equities volume rose 7% sequentially as investors repositioned their portfolios to take advantage of rising interest rates.

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

Excluding one-time items, Robinhood reported a loss of 20 cents per share, below analysts’ estimates of 31 cents, according to Refinitiv IBES data.

However, cryptocurrency trading volumes fell 12% month-on-month to $51 million as the broader market rout forced investors to shun other speculative assets. A year ago, it surged 860% to $51 million.

“This is better than their competitor Coinbase, which Robinhood has taken market share from this year,” said Michael Ganian, an analyst at research firm YipitData.

The commission-free brokerage firm’s monthly active users also fell to 12.2 million sequentially.

It reported 18.9 million users a year ago, when Robinhood’s easy-to-use interface was a hit among young investors trading cryptocurrencies from home and stocks like GameStop Corp (GME.N ) amid the COVID-19 pandemic.

Reporting by Mehnaz Yasmin in Bengaluru; Editing by Anil de Silva

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