Here’s why the $13 billion E-Trade deal makes sense for Morgan Stanley:
SAN FRANCISCO, CALIFORNIA - FEBRUARY 20: A sign is posted in the exterior of an E*Trade office onFebruary 20, 2020 in San Francisco, California. Morgan Stanley announced plans to buy online discount brokerage E*Trade in an estimated $13 billion all-stock deal. Morgan Stanley made big news this week when it announced a $13 billion stock purchase of online broker E-Trade.
After the E-Trade deal, Morgan expects that figure to rise to 57%. With E-Trade, Morgan Stanley will aim to do more cross-selling, work with next-generation clients, benefit from additional bank deposits that can be used for lending and target workplace planning accounts. The acquisition is in line with a larger trend across the wealth management space where the largest banks in the financial services space are increasingly going into the retail and brokerage space.
“E-Trade really is a bank these days just like Morgan Stanley,” Georgetown University McDonough School of Business associate professor James Angel said. “And the nice thing about adding these commercial bank deposits is they are really cheap so a company like Morgan can borrow or lend on the market rate but bank deposits are sticky and not as interest rate sensitive.
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