Morgan Stanley will be making the largest acquisition ever made by a Wall Street bank since the financial crisis after it takes over discount brokerage E Trade Financial Corp. The bank announced on Thursday that it had agreed to pay $13 billion in a stock deal to take over the company.
The move is part of the bank's wider plan of consolidating major players in the discount brokerage sector. The acquisition will also end up expanding Morgan Stanley's already growing wealth management unit, a business that the bank hopes would help it weather the storm during weaker investment banking periods.
During its earnings call with analysts, Morgan Stanley's chief executive officer, James Gorman, stated that the acquisition of E Trade should bring the bank's brand further forward.
Some analysts have pointed out that such a deal would have been very difficult to pull off under the previous administration, but regulators under US President Donald Trump have become more relaxed. This had led to a number of big-ticket takeovers in the past couple of years, significantly changing the country's financial sector.
Last year, Fifth Third Bancorp had acquired its rival MB Financial in a $4.7 billion deal after it got the green light from regulators. This was then followed by the merger of BB&T Corp and SunTrust, a deal that was also quickly approved by regulators.
Morgan Stanley's acquisition plans are also expected to be approved, but analysts expect the review process to take a bit longer than normal given that the Federal Reserve will likely step in to conduct its own systemic risk review. Gorman had expressed the same confidence and stated that he expects the deal to push through without a lot of regulatory hurdles.
The latest move will be the third time that Gorman had attempted to acquire E Trade. Gorman first attempted to acquire E Trade back when he was still working with Merrill Lynch in 2002. Five years later, Gorman made a second attempt after he had transferred to Morgan Stanley. The executive reportedly restarted merger talks with E Trade last year.
Since he started working for Morgan Stanley more than a decade ago, Gorman has orchestrated a number of major acquisitions. Some of the more notable ones include the company's takeover of Smith Barney, a move that laid the foundation for his plan to stabilize revenues by focusing on wealth management services.
Apart from Morgan Stanley, the company's rivals have also been busy transforming their business, albeit using different approaches. Goldman Sachs Group is currently pushing ahead with its plans to establish a retail banking unit. Meanwhile, UBS and the Bank of America Corp are focusing mainly on strengthening their respective lending and wealth management businesses.
