XTB Reports Sharp Drop in Q3 Results, Driven Down by ESMA Regulations

XTB, a Polish retail brokerage, has published its third-quarter financial results today for 2018. During this period, the firm took a hit in terms of trading activity, largely driven by the implementation of regulation from the European Securities and Markets Authority (ESMA).

During the three months ended September 30, 2018, XTB experienced a drop in contract for difference (CFD) trading, which resulted in lower figures across the board. Total operating income was PLN 47.6 million ($12.7 million), a 35 per cent fall from the same time period last year which achieved a total operating income of PLN 73.1 million.

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For the third quarter, XTB experienced a one-off event which saw the broker receive an administrative fine from the PFSA worth PLN 9.9 million. When factoring in this event, whilst the firm did report a profit, it was significantly less than that achieved in the same quarter in 2017. In fact, profit fell by 80 per cent year-on-year from PLN 31.3 million in 2017 down to PLN 6.2 million in the third quarter of this year.

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CFD revenues down on XTB, commodities provide small hope

According to the Polish retail broker, the introduction of ESMA’s regulation, which severely capped leverage for retail traders, was coupled with lower volatility in the financial markets as is common for the July-September period.

This can be seen in the revenues generated by the classes of financial instruments available for trading on XTB. Starting off first with currency CFDs, which recorded a revenue of PLN 10.4 million in the third quarter. This value does not factor in the fine the broker incurred during the period. This is a notable PLN 18.9 million or 64 per cent drop from the prior year period.

Commodity CFDs, on the other hand, actually saw a year-on-year uptick in revenues – the only class of CFDs to experience a gain in revenues. In the third quarter, revenue was PLN 27.9 million. This is PLN 22.3 million or 80 per cent more than the revenues recorded in the third quarter of 2017.

The total revenues generated from CFDs was PLN 47.3 million in the third quarter (excluding the fine). As can be expected this is down on a yearly basis, as Q3 2017 had a total revenue of PLN 72.5 million, representing a drop of 33 per cent.

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