XTB Report Sharp Drop in Revenue and Profitability in Q3-2018 Driven by ESMA Regulations

XTBThe Polish retail Fx brokerage firm, XTB after reporting fairly strong H1-2018 results, now has reported a weak set of Q3-2018 results mainly due to the negative impact of implementation of ESMA regulations coupled with lower volatility in the market. During the period, the firm also reported lower trading volumes in CFD trading.

XTB operates retail arm XTB.com and X Open trading platform has reported total revenue of PLN 47.6 million (USD $12.7 million) for the three months period, which is 43 percent lower compared to PLN 84.2 million in Q2-2018. The first quarter result was the best-ever quarter for the brokerage firm with record revenues of PLN 113.7 million. 

The company reported a net loss of PLN 2.9 million in the third quarter, majorly due to a one-off event that led to firm paying administrative fines of PLN 9.9 million to PFSA. Excluding the one-off event, the profit is reported at PLN 6.2 million which is significantly less than that achieved in the same quarter in 2017 of PLN 31.3 million.

Polish Financial Supervision AuthorityDespite the decline in trading volumes due to the implementation by ESMA of a 30x leverage cap on Forex and CFD trading, a number of new clients continued to grow with 16.3 percent year on year growth. New clients in Q3 totaled 4,884 and the average number of active clients higher by 11 percent year on year or 2014. 

In revenue breakup, 59 percent of the total revenue was contributed by Commodity CFDs i.e PLN 27.9 million, and Index CFDs contributed just 18.6 percent to the revenue. The currency CFDs recorded a revenue of PLN 10.4 million in the third quarter, which is not in line with the expectation of the broker as it dropped over 64 percent to PLN 18.9 million from the prior year period. Total revenue generated from CFDs is PLN 47.3 million in the Q3-2018 compared to  PLN 72.5 million in the same period year earlier, signifying a drop of 33 percent.