Morgan Stanley is buying online broker E-Trade for $13 billion
Shares of E-Trade rose 24% in premarket trading on the news while Morgan Stanley fell more than 5%. The deal comes nearly three months after E-Trade rivals Charles Schwab and TD Ameritrade announced a $26 billion merger. Discount brokers had to adapt their business models after just about every company in the industry eliminated commissions on online trades last year. That killed off what was once a lucrative revenue stream.
Gorman added on a conference call with analysts that the deal adds an"iconic brand" to Morgan Stanley that will instantly boost its digital business as well. The companies said in the press release that once the deal is done, Morgan Stanley will generate about 57% of its pre-tax profits from its wealth and investment management unit, up from about 26% ten years ago. E-Trade CEO Mike Pizzi will remain with the company and run the business for Morgan Stanley.
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