Updated Feb 20, 2020 - Economy & Business

Morgan Stanley to buy E*Trade in a $13 billion deal

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Morgan Stanley is buying E*Trade Financial, the company known for helping everyday Americans manage their money, in a $13 billion all-stock deal, the investment bank said Thursday.

Why it matters: The deal signals Morgan Stanley's desire to bulk up in wealth management, a strong profit arm of its business model. As the WSJ notes, Wall Street banks have been looking for steadier sources of revenue, now that "postcrisis regulations and a long period of eerie calm in the markets" have taken a toll on profits.

The big picture: The deal, which is expected to close by year-end, is the largest by a major American bank since the financial crisis.

  • The acquisition of E*Trade will add more than 8 million customers — plus $3.1 trillion in client money — to Morgan Stanley's wealth management arm.
  • Morgan Stanley CEO James Gorman told CNBC that the deal opens a "new demographic" of clients for the storied firm that has historically catered to the nation's most wealthy.

What they're saying: "Wall Street banks continue to covet Main Street customers," says Greg Bride, chief financial analyst at Bankrate.

  • One example is Morgan Stanley's arch-rival Goldman Sachs, which is dedicated to growing its digital consumer bank, Marcus, and serving the same demographic.

By the numbers: The deal is expected to boost the wealth management division's profit contribution to 57% — up from the 26% the business contributed in 2010, according to a company press release.

The bottom line: E*Trade has been in a state of limbo since November, when its major competitors — Charles Schwab Corp. and TD Ameritrade — merged, raising questions about whether E*Trade would be able to survive on its own, per the Journal.

  • Morgan Stanley will pay $58.74 per share for E*Trade — a 30% premium from where shares were trading before the deal was announced.

Go deeper: Six of the biggest U.S. banks have weaknesses in their crisis plans

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Barclays, BlackRock and Morgan Stanley traders catch coronavirus

Illustration: Eniola Odetunde/Axios

BlackRock, Morgan Stanley and Barclays have all undertaken "deep cleaning" procedures at various offices in the New York City area after traders at the firms tested positive for COVID-19.

What they're saying: BlackRock and Barclays said an infected person worked in their respective offices in Manhattan, while the Morgan Stanley employee worked at the company's purchase office.

AT&T plans to slash jobs as part of multi-billion cost-cutting effort

Photo: Saul Loeb/AFP via Getty Images

AT&T will look to cut tens of billions of dollars in costs over the next few years, including job cuts in the near term, AT&T president John Stankey said at a Morgan Stanley conference this week.

Why it matters: Critics were quick to point out that AT&T's cost-cutting plans come despite previous promises to increase investment and create jobs as part of the case for corporate tax cuts and the easing of net neutrality rules.

Mom and pop investors splurge on stocks

The New York Stock Exchange on Jan. 21. Photo: Spencer Platt/Getty Images

Trading volume at online and discount brokers like TD Ameritrade and the recently acquired E*Trade has exploded over the past year, Bloomberg reports, with TD Ameritrade alone having seen million-trade days multiplying at a "record pace."

What's happening: So-called mom and pop retail investors are chasing the U.S. bull market via online brokerages, thanks largely to top brokerage firms cutting trading fees to zero.