Published: Fri, February 21, 2020
Markets | By Otis Pena

Morgan Stanley to Buy E*Trade Financial in $13B Deal

Morgan Stanley to Buy E*Trade Financial in $13B Deal

U.S. investment bank Morgan Stanley announced on February 20 it will buy online trading pioneer E*Trade in a deal valued at $13 billion.

E-Trade, with 5.2 million client accounts and over $360bn of retail client assets, will be adding to Morgan Stanley's 3 million client accounts and $2.7tn of client assets, a press release said.

In the all-stock deal announced Thursday, E-Trade shareholders will receive 1.0432 Morgan Stanley shares for each share they own.

In April, E*Trade announced its plan to begin offering digital currency trading on its platform.

"E*Trade represents an extraordinary growth opportunity for our Wealth Management business and a leap forward in our Wealth Management strategy", Gorman said.

The brokerage's chief executive, Mike Pizzi, will continue to run the business.

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Banking deals in particular had languished after the financial crisis as strict capital and liquidity rules were imposed on lenders with more than $50 billion in assets, making it unattractive for mid-size firms to acquire more assets.

Big banks have been emboldened to do deals that would have been tricky for the Wall Street titans under President Barack Obama's administration. Morgan Stanley's income has been less volatile, and the bank has been consistently hitting its profitability goals, and the bank had record profits a year ago.

The deal is expected to close in the fourth quarter of 2020.

Late past year, E*Trade's biggest rival Charles Schwab Corp. agreed to buy TD Ameritrade Holding Corp for $26 billion.

The takeover confirms a shift for Wall Street banks away from an old model of wealth management with brokers charging commissions on trades for a relatively limited pool of high net worth individuals and corporate clients and toward a model based on the needs of millions of individual investors.

The first is negative in that it takes away a merger with E-Trade as a backup plan for Schwab if its merger with Ameritrade falls through because of overconcentration in Registered Investment Advisor market share.

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