Morgan Stanley Buys Online Discount Brokerage E*Trade

Feb 20, 2020
Originally published on February 20, 2020 8:05 pm
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MARY LOUISE KELLY, HOST:

The Wall Street firm Morgan Stanley took a big leap into the online world today. It is buying the discount brokerage firm E-Trade for $13 billion. The deal gives Morgan Stanley access to a new generation of tech-savvy customers, as NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: Morgan Stanley is one of the bluest of blue-chip Wall Street banks. It makes money not just through trading but, increasingly, by managing the money of rich people and corporations. The merger announced today vaults the company into the much newer world of online trading, says analyst Michael Wong of Morningstar.

MICHAEL WONG: They had always focused on their corporate investment banking clients and high net worth clients. And I would say with this E-Trade merger, they are expanding their client base into Main Street.

ZARROLI: The merger comes at a time when online brokers are stumbling badly. Last fall, Charles Schwab began offering completely free stock trading to its customers, and companies such as E-Trade were forced to do the same thing to compete. Wong says their revenues have taken a big hit.

WONG: Oh, free trading had a fairly drastic effect on the earnings of all of the online retail brokerages

ZARROLI: So E-Trade isn't as profitable as it used to be. But Morgan Stanley wants to buy it anyway. That's because E-Trade has a big roster of clients who trade stocks, and the bank hopes buying E-Trade will give it access to millions of potential new customers. The bank CEO, James Gorman, told CNBC today that E-Trade also knows a lot about online trading.

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JAMES GORMAN: This is a very savvy, tech-driven digital company. And that's what excites me about it.

ZARROLI: Gorman says more and more banking customers only want to do their banking online, and he says E-Trade knows how to provide the kinds of digital services they're looking for.

Jim Zarroli, NPR News, New York.

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