BANGALORE, INDIA – Morgan Stanley said Thursday it will buy discount brokerage E-Trade Financial Corp. in a stock deal worth about $13 billion, the biggest acquisition by a Wall Street bank since the 2008-2009 financial crisis.
Part of a broader consolidation in the discount brokerage sector, the move will add breadth to Morgan Stanley’s wealth management unit.
Chief Executive Officer James Gorman has been trying to build the business out to insulate the bank from periods weak for trading and investment banking.
Morgan Stanley’s main rival, Goldman Sachs Group Inc., has also been forging ahead with an upstart retail bank, while others, including Bank of America Corp. and UBS, are trying to focus on basic lending and wealth management services.
“The addition of E-Trade’s products and iconic brand will serve as a leap forward” for the bank,” Gorman said on a call with analysts.
The deal reflects a more relaxed regulatory mood under U.S. President Donald Trump’s administration, which has already helped unleash other big-ticket takeovers in the financial sector.
Big banks have been emboldened to do deals that would have been tricky for the Wall Street titans under the administration of President Barack Obama.
In March last year, U.S. regional bank Fifth Third Bancorp’s purchase of smaller rival MB Financial Inc. for $4.7 billion got a nod from regulators.
That was followed by approval for a $28 billion marriage of BB&T Corp. and SunTrust.
“We believe federal regulators are likely to approve Morgan Stanley’s acquisition of E-Trade, though the review could take longer than realized as we expect the Federal Reserve to conduct a systemic risk review,” said Jaret Seiberg of Cowen Washington Research Group.
Gorman sounded confident that the deal would proceed without any regulatory hurdles.
“We wouldn’t be entering into this (the deal) if we didn’t think from a regulatory perspective this would be viewed favorably,” said Gorman.
The U.S. Federal Reserve did not immediately comment on the deal.
Banking deals in particular had languished after the financial crisis.
Strict capital and liquidity rules were imposed on lenders with more than $50 billion in assets, making it unattractive for mid-size firms to acquire more assets.
In an interview with CNBC on Thursday, Gorman said he had attempted to buy E-Trade twice — in 2002 when he was at Merrill Lynch, and then again in 2007 at Morgan Stanley — before reinitiating talks late last year and finally sealing the deal.
Since taking over a decade ago, Gorman has pulled off multiple big acquisitions.
He orchestrated the bank’s takeover of Smith Barney, making wealth management the cornerstone of his plan to stabilize revenue.