Morgan Stanley, Not J.P. Morgan, Acquired E*TRADE in $13 Billion Deal: What You Need to Know

Morgan Stanley is buying online broker E-Trade for $13 billion in an all-stock deal, a move that shows how serious the Wall Street giant is about catering to everyday consumers.

Shares of E-Trade (ETFC) rose 24% in early trading on the news while Morgan Stanley (MS) fell more than 4%. The deal comes nearly three months after E-Trade (ETFC) rivals Charles Schwab (SCHW) and TD Ameritrade (AMTD) announced a $26 billion merger.

Discount brokers had to adapt their business models after just about every company in the industry eliminated commissions on online trades last year. That killed off what was once a lucrative revenue stream.

Trading has become a commodity business because of popular trading apps like Robinhood, which recently raised money in a funding round that valued the company at $7.6 billion.

Competition for customers is fierce and firms are launching new services to try and differentiate themselves. Mutual fund giant Fidelity, for example, recently unveiled a service that lets investors buy small chunks of high-priced stocks instead of entire shares. Robinhood already offers so-called fractional trading as well.

As a result, Wall Street speculated E-Trade could be a takeover target for either Morgan Stanley or Goldman Sachs (GS). Shares of another E-Trade rival, Interactive Brokers Group (IBKR), rose 3%.

E-Trade reported a nearly 30% drop in earnings per share from a year ago for the fourth quarter last month. That was worse than what analysts were expecting. Overall revenue was down 8% and commissions revenue plunged 54%.

But a combined Morgan Stanley and E-Trade will instantly become one of the leading financial firms on both Wall Street and Main Street.

E-Trade’s more than 5.2 million mainstream investing clients and over $360 billion in assets will boost Morgan Stanley’s wealth management unit, which tends to cater to more affluent customers. It currently has 3 million clients and $2.7 trillion in assets.

“E-Trade represents an extraordinary growth opportunity for our Wealth Management business and a leap forward in our Wealth Management strategy,” said Morgan Stanley chairman and CEO James Gorman in a statement.

Gorman added on a conference call with analysts that the deal adds an “iconic brand” to Morgan Stanley that will instantly boost its digital business as well.

The companies said in the press release that once the deal is done, Morgan Stanley will generate about 57% of its pre-tax profits from its wealth and investment management unit, up from about 26% ten years ago.

E-Trade CEO Mike Pizzi will remain with the company and run the business for Morgan Stanley. Gorman said there will be “no disruption” for current E-Trade clients.

Pizzi and Gorman both talked about how the addition of E-Trade will also allow Morgan Stanley to offer more traditional banking services, such as checking and savings accounts, to E-Trade’s younger consumer base.

The companies also touted E-Trade’s corporate services division, which helps to set up stock plans for big public companies. That business accounted for about a quarter of the company’s overall accounts, which should help soften the blow from the lost commission revenue.

Morgan Stanley and E-Trade also said they were hopeful the merger would be approved by regulators and shareholders by the fourth quarter of the year. Morgan Stanley said that it anticipates $400 million in potential cost savings, but the company did not mention whether any job cuts would take place. Ad Feedback Ad Feedback Ad Feedback Ad Feedback Ad Feedback

Hey there! So you might be wondering if J.P. Morgan bought ETRADE. The short answer is: nope, they didn’t. It was actually Morgan Stanley that acquired ETRADE in 2020. Let’s clear up this common confusion and dive into what actually happened in this major financial deal.

The Actual Acquisition: Setting the Record Straight

In October 2020, Morgan Stanley completed its acquisition of E*TRADE Financial Corporation in an all-stock transaction valued at approximately $13 billion. This was one of the biggest takeovers by a U.S. bank since the financial crisis.

Many people mix up Morgan Stanley and J.P Morgan Chase because both are major financial institutions with “Morgan” in their names. But they’re completely different companies with separate histories and business models.

Deal Specifics: What Actually Happened

Here’s the nitty-gritty on what went down:

Morgan Stanley announced the deal in February 2020
The acquisition was completed on October 2, 2020
ETRADE stockholders received 1.0432 Morgan Stanley common shares for each ETRADE share
The total value of the deal was approximately $13 billion
ETRADE’s CEO, Michael Pizzi, joined Morgan Stanley’s team to continue leading the ETRADE brand
Shelley Leibowitz, an E*TRADE director, joined Morgan Stanley’s Board of Directors

Why Morgan Stanley Wanted E*TRADE

Morgan Stanley didn’t just drop $13 billion for nothing They had several strategic reasons for this acquisition

1. Expanding Their Customer Base

E*TRADE brought 5.2 million customer accounts with $360 billion in assets to Morgan Stanley. This was a huge boost for Morgan Stanley’s wealth management division.

2. Access to Deposits

Morgan Stanley gained access to E*TRADE’s $56 billion in deposits This was a big deal because Morgan Stanley had previously struggled to raise deposits to fund loans to its wealthy clients The acquisition immediately lowered their funding costs by about $150 million.

3. Diversifying Revenue Streams

After the acquisition, wealth management would make up almost 60% of Morgan Stanley’s pretax profits. This provided a nice counterweight to their more volatile Wall Street businesses like institutional trading.

4. Digital Capabilities

ETRADE had built a robust direct-to-consumer digital platform over 38 years. Morgan Stanley wanted to combine their advisor-driven model with ETRADE’s digital capabilities to enhance their offerings.

5. Corporate Stock Plan Business

E*TRADE had a strong business managing corporate stock plans, which was another attractive asset for Morgan Stanley.

The Strategic Shift for Morgan Stanley

This acquisition represented a significant strategic shift for Morgan Stanley. Traditionally known as a tony investment bank catering to rich Americans and corporations, the E*TRADE deal was Morgan Stanley’s play for the masses.

As CEO James Gorman put it: “The addition of E*TRADE positions us as an industry leader in Wealth Management across all channels and segments, and significantly increases the scale and breadth of our Wealth Management franchise.”

Industry Context: Why the Timing Made Sense

The acquisition happened during a period of consolidation in the discount brokerage industry:

Startups like Robinhood had popularized commission-free trading
Major brokerages were eliminating commissions on most stock trades
This “race to zero” had squeezed E*TRADE’s business model and depressed its stock price
These factors likely motivated E*TRADE to consider giving up independence

What This Meant for Customers

If you were an E*TRADE customer during the acquisition, you might have wondered how this affected you. Here’s what happened:

E*TRADE continued to operate under its own brand
Michael Pizzi stayed on to lead E*TRADE’s direct-to-consumer business
The platform’s core services remained intact
Over time, customers gained access to some of Morgan Stanley’s offerings
The combined entity now oversaw $3.3 trillion in assets

Comparing to Other Financial Mergers

To put this deal in perspective, it’s worth noting that this was the biggest takeover by a U.S. bank since the financial crisis. Some competitors claimed Morgan Stanley overpaid for E*TRADE’s assets, particularly pointing out that Goldman Sachs had managed to raise a similar amount of deposits (over $50 billion) by organically developing its own Marcus business.

The Aftermath: How It’s Going

Since the acquisition, Morgan Stanley has continued to integrate ETRADE’s operations while maintaining the ETRADE brand. The combined entity now offers a more comprehensive range of financial services:

High-end financial advisors for wealthy clients
Self-directed trading for retail investors
Corporate stock plan management
Banking and lending services
Investment research and education

Why People Confuse J.P. Morgan and Morgan Stanley

It’s a super common mistake to mix up these two financial giants. Here’s why people often get confused:

Similar Names: Both have “Morgan” in their names, which stems from their historical connections to the famous banker J.P. Morgan.
Both Are Major Banks: Both companies are prominent financial institutions that offer investment banking services.
Shared History: While separate entities today, both firms can trace parts of their heritage back to J.P. Morgan’s original banking enterprises.

However, they’re distinct companies:

J.P. Morgan Chase is a universal bank with a large retail banking presence
Morgan Stanley has traditionally focused on investment banking and wealth management

What This Means for the Financial Industry

The Morgan Stanley-E*TRADE deal represents an ongoing trend of consolidation in the financial services industry. Traditional investment banks are increasingly looking to diversify their revenue streams by expanding into retail banking and digital services.

This acquisition highlights several important trends:

The blurring lines between different types of financial institutions
The increasing importance of digital platforms
The value of stable deposit bases for investment banks
The pressure on discount brokerages in a zero-commission environment

Should You Care About This Deal?

If you’re wondering whether this matters to you, here’s my take:

If you’re an E*TRADE customer: You’ve essentially become a Morgan Stanley client, though the E*TRADE experience has remained largely familiar.
If you’re a Morgan Stanley client: You now have access to a broader range of services, including more self-directed options.
If you’re an investor in either company: The combined entity offers a more diversified business model with multiple revenue streams.
If you’re just interested in finance: This deal represents a significant evolution in how traditional Wall Street firms are adapting to changing market conditions and consumer preferences.

The Bottom Line

So to recap the main point: No, J.P. Morgan did not buy E*TRADE. It was Morgan Stanley that acquired the online brokerage in a $13 billion all-stock deal completed in October 2020.

This acquisition was part of Morgan Stanley’s strategy to expand its wealth management business, gain access to E*TRADE’s deposit base, and broaden its appeal beyond just high-net-worth clients. The deal represented one of the most significant banking acquisitions since the 2008 financial crisis and signaled Morgan Stanley’s commitment to serving a broader segment of the investing public.

Whether this merger will ultimately prove successful in the long run remains to be seen, but it certainly transformed both companies and created a more diverse financial services powerhouse.

So next time someone asks you “did J.P. Morgan buy E*TRADE?”, you can confidently set the record straight!

did j p morgan buy e trade

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Fear & Greed Index

did j p morgan buy e trade

Morgan Stanley is buying online broker E-Trade for $13 billion in an all-stock deal, a move that shows how serious the Wall Street giant is about catering to everyday consumers.

Trading has become a commodity business because of popular trading apps like Robinhood, which recently raised money in a funding round that valued the company at $7.6 billion.

As a result, Wall Street speculated E-Trade could be a takeover target for either Morgan Stanley or Goldman Sachs (GS). Shares of another E-Trade rival, Interactive Brokers Group (IBKR), rose 3%.

But a combined Morgan Stanley and E-Trade will instantly become one of the leading financial firms on both Wall Street and Main Street.

Gorman added on a conference call with analysts that the deal adds an “iconic brand” to Morgan Stanley that will instantly boost its digital business as well.

E-Trade CEO Mike Pizzi will remain with the company and run the business for Morgan Stanley. Gorman said there will be “no disruption” for current E-Trade clients.

E-Trade has about $56 billion in deposits, which will help provide funding for Morgan Stanley.

Gorman referred to this division as “a killer business” on the conference call.

Morgan Stanley close to offering crypto trading through E-Trade

FAQ

Is E-Trade owned by JP Morgan?

No, J.P. Morgan does not own ETRADE;

Who bought out E-Trade?

Morgan Stanley bought E*TRADE in an all-stock transaction that was completed in October 2020. The acquisition was a significant deal, valued at $13 billion, and it integrated the online brokerage’s digital platform with Morgan Stanley’s wealth management services.

How much did Morgan Stanley pay for an E-Trade?

Morgan Stanley bought E*TRADE for $13 billion in an all-stock deal.

Why did Morgan Stanley buy the E-Trade?

Morgan Stanley bought ETRADE primarily to expand its wealth management business, gaining access to ETRADE’s large base of retail clients, digital platform, and corporate stock plan business. This acquisition allows Morgan Stanley to compete more broadly across different customer segments, including the mass affluent and younger clients, by combining E*TRADE’s direct-to-consumer channel with its own high-end financial advisory services.

The Actual Acquisition: Setting the Record Straight

Deal Specifics: What Actually Happened