Morgan Stanley is to buy discount brokerage E*Trade Financial Corp in a stock deal worth about $13bn, making it the biggest acquisition by a Wall Street bank since the 2008-2009 financial crisis.
Part of a broader consolidation in the discount brokerage sector, the move will add to Morgan Stanley’s wealth management unit, a business that chief executive officer James Gorman has been trying to expand.
Gorman said he had attempted to buy E*Trade twice, once in 2002 when he was at Merrill Lynch and again in 2007 at Morgan Stanley, before re-initiating talks late last year.
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“The addition of E*Trade’s products and iconic brand will serve as a leap forward (for the bank)”, Gorman stated.
Big banks have been encouraged to do deals that would have been tricky for the Wall Street titans under President Barack Obama’s administration.
In March last year, US regional bank Fifth Third Bancorp’s purchase of MB Financial Inc for $4.7bn got a nod from regulators. It was followed by approval for a $28bn marriage of BB&T Corp and SunTrust.
Gorman is said to be confident that the deal would go through without any regulatory hurdles.
“We wouldn’t be entering into this (the deal) if we didn’t think from a regulatory perspective this would be viewed favourably,” he said.
Morgan Stanley will get E*Trade’s more than 5.2 million client accounts and $360bn of retail client assets. The brokerage’s CEO, Mike Pizzi, will continue to run the business following the merger.
The US Federal Reserve has not commented on the deal.