July 17, 2020
Morgan Stanley offices. Lubo Ivanko | stock.adobe.com
Morgan Stanley’s offer to expand its brokerage services to a cohort of younger, less wealthy investors advanced on Friday when E * Trade Financial Corp. said its shareholders approved a merger with the wire house.
The acquisition should add about $ 3 billion in revenue to the Morgan Stanley top line, President and CEO James Gorman told analysts Thursday, courtesy of E * Trade’s popularity with online investors, its shareholder accounts in the business workplace, its online banking franchise and its small custody business for clients of registered investment advisers.
“There is a long list of things that make this attractive,” he said in Morgan Stanley’s second-quarter earnings call, including the ability to expand to international investors online, to test the custody market for registered investment advisers. and sell loans and deposits digitally. .
“They have an excellent brand for a younger generation of investors,” said Gorman. “They have an excellent brand for more active commercial investors and for commercial options investors.”
E * Trade’s performance during volatility and restrictions on work at home in the Covid-19 economy reinforced Morgan Stanley’s commitment to the deal, as the discount brokerage added hundreds of thousands of new accounts and billions of dollars that Gorman characterized as “real money,” not just kids playing. “
Morgan Stanley Chief Financial Officer Jonathan Pruzan applauded his potential partner’s technological prowess. “The plant has been very well maintained,” he said. “The technology is excellent. They haven’t had any harsh interruptions. “
Morgan Stanley brokers and clients have experienced some technology glitches during the closing period, including a four-hour outage in late March that prevented normal order routing.
The deal, which is expected to close in the fourth quarter, subject to final regulatory approval, will also improve Morgan Stanley’s capital ratios and create spending efficiencies on the platforms of the two companies, Gorman said.
Morgan Stanley announced its $ 13 billion share deal in February, three months after Charles Schwab Corp. said it would pay $ 26 billion to buy TD Ameritrade.
In a proxy filing last month, E * Trade revealed that shareholders had filed nine lawsuits against the firm and its directors to block the merger on allegations that the disclosed details of the merger were incomplete and misleading.
E * Trade believes the claims are “without merit,” the filing said. So-called “mock trials” are often presented to induce agreement.
Charles Schwab and TD Ameritrade in May resolved similar “contentious lawsuits”, agreeing to issue additional merger documentation. Their regulatory filings said the lawsuits were withdrawn and did not discuss the monetary terms.
