The roughly
E-Trade will bring with it 5.2 million client accounts,
The deal also gives E-Trade some shelter during a time of massive disruption in the retail brokerage industry. Its rivals
Brokerages still make money from account fees and interest earned on customers’ cash, but the price war has pummeled revenues.
“Between zero trading commissions and competitive yielding savings accounts and cash management products, the competition for consumers’ cash and investments is as fierce as ever,” said
Industry analysts believe the complementary parts of Morgan Stanley and E-Trade make them a good fit, and E-Trade’s stocks surged nearly 24% after the announcement Thursday. But Morgan Stanley’s stock was down more than 4% within the first few minutes of trading, reflecting investors’ concerns that it may be paying too high a price.
E-Trade shareholders will receive 1.0432 Morgan Stanley shares for each share they own. That values each E-Trade share at
E-Trade CEO
Under CEO
The strategy has worked. Morgan Stanley's income has been less volatile, and the bank has been consistently hitting its profitability goals, and the bank had record profits last year.
“E-Trade represents an extraordinary growth opportunity for our wealth management business and a leap forward in our wealth management strategy," Morgan Stanley Chairman and CEO
Besides the deposits the deal will bring over, which Morgan Stanley can use to start making loans, E-Trade also has a popular online platform that helps businesses manage their employee stock plans, which will be merged into Morgan Stanley's existing platform. The stock plan administration business could be the most compelling piece of the tie-up.
Consolidation has been picking up across many parts of the financial industry, as companies bulk up in the face of customers increasingly demanding lower fees. Just this week, asset manager
E-Trade has been a pioneer in the online brokerage business, telling people they can trade stocks at lower prices and with greater ease by going through their computers or phones rather than full-service brokers. It’s perhaps most famous for a run of advertisements that began with the 2008
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