Morgan Stanley to Buy E-Trade for $13B
The tie-up could create a firm with $3 trillion in assets vs. Charles Schwab-TD Ameritrade's potential $5 trillion.
Morgan Stanley is buying discount broker E-Trade Financial for $13 billion, creating a firm that could have over $3 trillion in client assets.
The news comes three months after Charles Schwab said it was acquiring TD Ameritrade for $26 billion. That merger, now going through antitrust review, would potentially lead to a combined firm with $5 trillion in assets.
“E-Trade represents an extraordinary growth opportunity for our wealth-management business and a leap forward in our wealth-management strategy,” Morgan Stanley CEO James Gorman said in a statement.
If approved, the transaction would give Morgan Stanley both direct-to-consumer and digital capabilities to compete more aggressively with Merrill Edge and other mass-affluent offerings from rivals. Morgan Stanley’s 15,500 financial advisors focus more on high-net-worth and ultra-high net worth clients.
“This continues the decade-long transition of our firm to a more balance-sheet-light business mix, emphasizing more durable sources of revenue,” Gorman said.
‘Hefty Price’
Not everyone agrees with Morgan Stanley’s rosy view of the deal.
“They’ll be writing a big chunk of this down in the coming years. There’s nothing here. Imagine acquiring customers who don’t plan to pay you for anything/?” said Josh Brown, CEO of Ritholtz Wealth Management, on Twitter.
“It’s a pretty hefty price,” Alison Williams, an analyst at Bloomberg Intelligence, said on Bloomberg Television, adding that the move “is consistent with Morgan Stanley’s strategy” to push further into the mass-affluent market.
But credit analyst David Havens at Imperial Capital said in a note to clients that the deal “deepens the ‘safe’ wealth management franchise — rich in fees and stability” and “reduces reliance on the more mercurial trading and markets businesses.”
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