Standard & Poor’s (S&P) Global Ratings announced on Monday that it has revised its outlook on BG LLC and its subsidiary Interactive Brokers LLC, downgrading it from positive down to stable.

At the same time, S&P has affirmed its ‘BBB’ issuer credit rating on IBG LLC and its ‘BBB+’ long-term and ‘A-2’ short-term issuer credit ratings on Interactive Brokers LLC.

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“We revised the outlook to stable from positive to reflect that while we expect IBG to remain highly profitable and capitalized, uncertainty over the length and severity of COVID-19-related market and economic stress raises the potential for losses, to the extent that we are unlikely to raise our ratings on IBG until the COVID-19 threat has receded,” S&P Global Ratings said in a statement today.

As Finance Magnates reported, Interactive Brokers posted an aggregate provisionary loss of approximately $88 million after US oil prices went negative last month.

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S&P expects Interactive Brokers to maintain strong capitalisation

The stable outlook provided by S&P reflects its expectation that IBG will maintain a very strong capitalisation, as well as supportive profitability and liquidity amid the coronavirus pandemic.

Overall, the credit rating agency expects that Interactive Brokers will maintain its RAC ratio well above 25 per cent, gross stable funding ratio in excess of 110 per cent, and a liquidity coverage metric above 90 per cent.

All going well, over the next 12 to 24 months S&P may raise the ratings on IBG once the stress of the pandemic has lessened if it expects the firm’s options market-making risk lessens, its new pricing option does not materially erode profitability, management remains committed to holding very strong levels of capital and if it sees a growth of less confidence-sensitive brokerage clients and shrinking market-making business to bolster its business and financial stability.

“Over the same time horizon, we could lower the ratings if we expect the firm’s RAC ratio to weaken to below 20% or if its business displays less stability, higher risk, or losses, or a material decline in liquidity,” the credit rating agency said today.