Morgan Stanley said Thursday that it is buying online brokerage E*Trade for about $13 billion, a sign that Wall Street banks continue to covet Main Street customers.
The deal, analysts say, gives Morgan Stanley access to brokerage customers, employees with company stock and low-cost retail bank deposits, which are the lifeblood of financial services.
The trend of zero trading commissions, competitive savings account yields and cash management products shows “the competition for consumers’ cash and investments is as fierce as ever,” Greg McBride, chief financial analyst at Bankrate.com, said in a note. This deal, he continued, reaches a broad spectrum of households and signals “it isn’t just the ultra-wealthy that are in demand.”
E*Trade has over 5.2 million client accounts with over $360 billion of retail client assets, adding to Morgan Stanley’s existing 3 million client relationships and $2.7 trillion of client assets.
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E*TRADE provides a suite of digital banking services, including direct integration with brokerage accounts, checking and high-yield savings accounts, which could significantly accelerate Morgan Stanley’s digital banking efforts. The transaction adds about $56 billion of low-cost deposits, which is expected to provide funding benefits to Morgan Stanley.
The deal follows a wave of consolidation in the industry. On Tuesday, asset manager Franklin Resources announced a deal to buy Legg Mason for $4.5 billion. In November, brokerage firm Charles Schwab agreed to buy TD Ameritrade for about $26 billion.
In the all-stock deal announced Thursday, E*Trade shareholders will receive 1.0432 Morgan Stanley shares for each share they own.
Shares of E*Trade surged 25% Thursday after the deal was announced Thursday. Morgan Stanley’s stock fell 3%.
The deal is expected to close in the fourth quarter.
“As Goldman Sachs has grown their online bank Marcus, and as Schwab has acquired TD Ameritrade, the trail was blazed for Morgan Stanley’s pathway into financial services for mass affluent and the up-and-comers that will be tomorrow’s affluent households,” McBride says.
The Associated Press contributed to this article.