|Bid||45.55 x 3000|
|Ask||45.58 x 800|
|Day's range||45.44 - 45.99|
|52-week range||38.76 - 57.57|
|Beta (5Y monthly)||1.34|
|PE ratio (TTM)||8.80|
|Earnings date||14 Apr 2020 - 19 Apr 2020|
|Forward dividend & yield||1.40 (2.91%)|
|Ex-dividend date||29 Jan 2020|
|1y target est||61.14|
Morgan Stanley's Deputy Chief Financial Officer Paul Wirth will retire after 15 years with the bank, according to a memo sent to employees seen by Reuters on Wednesday. Wirth, 62, has served as the right-hand to the bank's Chief Financial Officer Jonathan Pruzan since 2009. Wirth's replacement was not immediately announced.
(Bloomberg Opinion) -- The deadly coronavirus has spread to European holiday destinations. That’s of huge concern to a travel industry that will soon be gearing up for its peak summer season.When the outbreak emerged in China, worries centered on airlines and hotels in that region, as well as valuable outbound tourism from the country. But now the disease has shown up in Italy, and notably in Spain’s Canary Islands, shorter haul European travel is being drawn into the fray.Shares in TUI AG, Europe’s biggest travel operator, have fallen about 18% this week, while those of the budget airlines EasyJet Plc and Ryanair Holdings Plc are down by about 20%.Already reeling from the “flight shame” phenomenon, which has seen some environmentally conscious consumers shunning air travel, and disruption from grounded Boeing 737 Max jets, a global viral outbreak will have a profound effect on the confidence of travelers and vacationers everywhere.Europe’s peak period for early holiday bookings, stretching from Boxing Day to the third week of January, ended just as the virus was emerging. The first Saturday in January is known as “Sunshine Saturday,” when holidaymakers hit the travel agents or, more probably, buy their flight and accommodation on the internet.But even booked trips are at risk of cancellation as Europeans digest what’s happening in the Spanish holiday island of Tenerife, where 700 people have been contained in a hotel after several guests were found to have the virus. What’s more troubling for the travel industry is that most of their profit doesn’t come from early bookers, but rather from people who are buying holidays from now onward.The outbreak in northern Italy is equally difficult for the airlines (it is a big part of Ryanair’s business) and travel companies, but that country tends to offer more upmarket destinations. The Canary Islands and mainland Spain — where some cases have also been identified — are firmly in the middle and mass markets, so the impact there could be bigger. TUI AG’s RIU hotel chain has a strong presence in Spain and the Canary Islands.Cruises, obviously, have been hit hard by the outbreak, given the pictures of passengers quarantined on ships being beamed around the world. That’s another big worry for TUI, which which has been building its ships business. Analysts at Morgan Stanley estimate that the volume of bookings has fallen by double digits across the whole of the cruise market in the U.S. and Europe in recent weeks.If the outbreak is contained relatively soon, the effect on tour operators might be short-lived. Holidaymakers who have held off from booking should come back to the market. But if infections continue beyond May, as looks increasingly likely, the industry’s problems will intensify.At this point, the travel groups are usually snapping up airline capacity for the peak summer months. As they make all of their profit during this period, a prolonged outbreak now would be doubly damaging. One poor summer season in 2018, because of a European heatwave, helped to sink the British travel giant Thomas Cook. That company was also burdened by more than 1 billion pounds ($1.3 billion) of debt, but it’s fate underlines just how dependent the travel industry is on the traditional beach getaway.To contact the author of this story: Andrea Felsted at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Global investors are stashing more and more assets into gold as the coronavirus outbreak spreads and appetite for risk takes a hit.The global tally of bullion in exchange-traded funds swelled by the most in more than a month on Tuesday as equities sank. That was the 25th consecutive day of inflows, a record. At 2,624.7 tons, the holdings are the largest ever.After surging 18% last year, gold has extended its rally in 2020, with prices hitting the highest since 2013. The haven has been favored as the virus outbreak has spread beyond China, threatening a pandemic and slower growth.Goldman Sachs Group Inc. has said that should the disruption from the disease stretch into the second quarter, prices may rally toward $1,850 an ounce. Spot bullion was last at $1,644.67, up 0.6%. It touched $1,689.31 on Monday.A global recession is likely if the coronavirus becomes a pandemic, according to Moody’s Analytics Chief Economist Mark Zandi. The odds of that outcome now stand at 40%, up from 20%, he said in a note.The threat of a prolonged downturn in growth due to the impact of the virus may keep gold elevated, according to Morgan Stanley. Further ETF inflows are likely as long as real interest rates remain negative, it said in a note.(Updates price in fourth paragraph)To contact the reporter on this story: Ranjeetha Pakiam in Singapore at firstname.lastname@example.orgTo contact the editors responsible for this story: Phoebe Sedgman at email@example.com, Jake Lloyd-Smith, Alpana SarmaFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- The 10-year U.S. Treasury yield fell to a record low on Tuesday as investors sought shelter amid concern that the global spread of the coronavirus is threatening supply chains critical to economic growth.The benchmark rate for global borrowing fell as much as 5.8 basis points to 1.3121%, extending its year-to-date decline to 61 basis points. The 30-year yield, which set a fresh all-time low Friday, extended its decline to as low as 1.79%.“The bond market is sniffing out that this is more than a contained virus and the impact on the global economy is probably going to be worse than people are anticipating,” said John Fath, managing partner at BTG Pactual Asset Management and a primary dealer trader from 1993 to 2008.The previous record low for the 10-year, 1.318%, was reached in July 2016 in a rally led by U.K. gilts following the Brexit vote in June.As stocks tumbled worldwide, other haven bond markets also have rallied. German and Dutch 30-year yields turned negative on Monday for the first time since October. The 2-year Treasury yield also slumped, dropping to a three-year low.What this means as an active manager is “you have to collapse risk in your portfolio” and hug more tightly to your benchmark index, said Jim Caron, fixed income money manager at Morgan Stanley Investment Management.Yields can keep sliding as investors pile into safe assets to offset their riskier holdings, according to Caron.“There are very few high-quality hedges in the bond market -- other than the U.S. Treasury market -- that you can buy where yields actually have scope to fall,” he said.Meanwhile, Wall Street is increasingly betting that the Federal Reserve may have to cut rates again as jitters over the virus roil financial markets.With yields below the Fed’s policy rate, “it’s clear their hands are going to be forced by the market if things don’t improve,” said Fath.(Adds comment from an investor)\--With assistance from Emily Barrett.To contact the reporter on this story: Elizabeth Stanton in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Benjamin Purvis at email@example.com, Debarati Roy, Mark TannenbaumFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Intuit Inc., the software giant behind TurboTax, is buying personal finance website Credit Karma Inc. for about $7.1 billion in cash and stock.San Francisco-based Credit Karma has garnered more than 100 million users by offering free credit scores since it was founded in 2007. The financial technology startup offers other services too, including the ability to apply for a credit card, find an auto loan or start a savings account. The combination will help consumers manage debt, maximize savings and have better access to credit cards and loans, Intuit said in a statement Monday.Fintech companies are at a crossroads where a number of them are established enough to go public, but a spate of poor-performing IPOs are making acquisitions more attractive. At the same time, incumbent companies aren’t afraid to snap up startups as a way to fuel their own growth. “The fertile M&A market, shift to growth stage investments, and rich valuations open the door for a lot of discussions, as well as distractions,” said Lindsay Davis, an analyst at CB Insights. “Fintech startups will have a choice to take a deal or buckle down and focus on filling product gaps.”Perhaps most similar to Intuit, Credit Karma also launched a free tax-filing platform a few years ago and has been trying to poach customers of Intuit’s TurboTax offering.More than 30 million users log into Credit Karma every week, the company has said. These users don’t pay the company for any of its services, and Credit Karma makes money through an affiliate fee it receives when someone successfully applies for a loan or credit card on its platform. Credit Karma generated almost $1 billion in unaudited revenue last year, up 20% from 2018, Intuit said.Intuit also reported fiscal second-quarter results, with revenue up 13% in the period to $1.7 billion, topping the average analyst estimate of $1.68 billion. Net income rose 27% to $240 million, or 91 cents a share, in the three months ended Jan. 31. The company reiterated its fiscal 2020 outlook for revenue of $7.44 billion to $7.54 billion. The transaction is expected to be neutral or add to Intuit’s adjusted earnings per share in the first full fiscal year after the transaction closes, the company said.The deal is only the latest in a slew of acquisitions in the industry. Morgan Stanley recently announced plans to buy E*Trade Financial Corp. for $13 billion, while Visa Inc. agreed to acquire Plaid for $5.3 billion in January.Late last year, PayPal Holdings Inc. snapped up online coupon company Honey Science Corp. for $4 billion and Charles Schwab Corp. is acquiring TD Ameritrade Holding Corp. for $26 billion.QED Investors, Ribbit Capital and Founders Fund were early backers of Credit Karma.(Updates with Intuit earnings results in sixth paragraph.)To contact the reporter on this story: Julie Verhage in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Mark Milian at email@example.com, Linus Chua, Molly SchuetzFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Jonathan Pruzan, Executive Vice President and Chief Financial Officer of Morgan Stanley, will speak at the Credit Suisse Financial Services Forum in Florida on Thursday, February 27, 2020, at 3:20 p.m. (ET).
(Bloomberg Opinion) -- E*Trade Financial Corp. sits at the intersection of two of the world’s most persistent boys’ clubs: Wall Street and Silicon Valley. But behind the layers of computer code that enable at-home investors — another mostly male crowd — to buy and sell stocks online, there’s a group of female tech wizards at E*Trade that make it possible.Fostering a culture that attracts and advances women in the STEM fields is one more way that E*Trade, one of the earliest online brokerages, has been a pioneer in the industry. That little-known trait is something its new corporate parent, Morgan Stanley, would be smart to preserve — and emulate — especially as it looks to reach a wider set of customers. Morgan Stanley agreed on Thursday to acquire E*Trade for $13 billion, fusing together an old-school brokerage business of wealthy Wall Street clients with a digital Main Street brand that resonates with younger people. It’s an opportunity for the white-shoe firm to gain a new type of customer it wasn’t equipped to reach in a corner of the market that’s growing — and one that’s bound to draw more prospective female customers over time. E*Trade had 5.17 million retail accounts as of December and an average of more than 300,000 trades each day. I first learned about E*Trade’s impressive roster of female tech leadership in mid-2018, when I had the pleasure of interviewing them and hearing their stories in the company’s New York office just outside Times Square. They reflected on working their way up in an industry where they initially saw few other female faces, then later a few more, and more yet when they joined E*Trade.Women still head up key teams, such as the innovation lab, run by Jeanne Jang, an alum of International Business Machines Corp. Liensa Vidra has risen up the E*Trade ranks to vice president of product management, and Heather Munoz is senior vice president of tech development, following a career at CME Group Inc. Alice Milligan, who’s made stops at American Express Co. and Citigroup Inc.’s North America consumer bank, was named E*Trade’s chief customer officer last May, overseeing all retail products and how digital customers use them. As with any business, some employees I met have moved on, but the leadership in the chief customer office — the core of E*Trade — is currently 60% female, according to a spokeswoman. That’s almost unheard of in financial services, where it’s hard not to notice that almost all the firms are named after men (Morgan Stanley included). A few of the women I spoke with stressed the importance of informal mentoring — from both male and female leaders — and having it happen organically. Alison Li, a web development manager for whom English is a second language, said that she had never had a female mentor until joining E*Trade and that it brought her out of her shell. “I felt the difference,” she said in our 2018 interview. Diversity helps the intimidation factor of being a woman in fintech fade away, is how Eileen Kane, now vice president of IT project management, put it at the time. Having a father who was an engineer when she was growing up, Kane “never thought this wasn’t a place for women to be,” a message she has since passed on to her children; her 20-year-old daughter is a STEM student. A common sentiment they all shared was wanting to pay it forward for the next crop of female techies. E*Trade might be one of the last places one would expect to find such a bastion of female support and diversity. After all, this is a company that just three years ago advertised its services with a cliche commercial showing a dorky white guy partying on a yacht full of bikini-clad bombshells after becoming rich using E*Trade. Its commercials have since evolved: One of last year’s ads swapped out the dude for an adorable dog on a speedboat; another featured a young woman floating poolside on an Instagrammable swan raft while checking her E*Trade account. Broadly speaking, women, not least because they earn less than men, also invest less. A 2017 survey by Bank of America Merrill Lynch found that while most are confident in budgeting and paying bills, only 52% are confident managing investments, compared with 68% of men. A majority of the female respondents also said that the financial services industry has traditionally catered to men. Funny enough, an abundance of research has shown that women make pretty good investors. They tend to be more cautious, patient, trade less (which saves on fees), are less prone to panic and thus outperform. As I’ve noted before, it’s no wonder that women share these traits with Warren Buffett, the world’s most celebrated investor. Even so, only 10% of fund managers in the U.S. are women, and they tend be put in charge of passive funds, according to consistently depressing but important research done by Morningstar Inc.Corporate America has certainly placed a bigger emphasis on gender diversity and pay equity. But when companies brag about their progress, a closer look will often reveal that female leaders tend to be clustered around public relations and human resources. As important as that work is, those positions don’t put women on course to become the next CEO.That’s why I found E*Trade so refreshing. Women are at the center of the company’s foundation: its technology, the “E” in its 1990s-throwback of a name. Having that diverse perspective and life experience will only help E*Trade and its new parent design products that appeal to a wider group of customers. (I’d be remiss not to mention Ellevest here, a robo-adviser that already specifically targets women and was founded by Sallie Krawcheck, who once ran wealth management at Bank of America and Citi.)James Gorman, chairman and CEO of Morgan Stanley, said he’s considering calling his newly acquired business something along the lines of E*Trade Powered by Morgan Stanley, but that it’d be “completely nuts” to get rid of the E*Trade brand. E*Trade CEO Mike Pizzi isn’t going anywhere either. The bank would do well to keep E*Trade’s culture intact, too.To contact the author of this story: Tara Lachapelle at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Niemi at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Intuit Inc. is close to buying Credit Karma Inc. for about $7 billion in cash and stock deal, the Wall Street Journal reported, citing people familiar with the matter it didn’t identify.The purchase, which could be announced by Monday, will push the maker of TurboTax deeper into the consumer finance space, the newspaper said. The acquisition would also be Intuit’s largest in its 37-year history, it added.Broadening its sales base is important at a time when Morgan Stanley said it’s expecting tax-preparation software companies to face headwinds for the revenue they get from each tax return this year due to the combined effect of a rising mix of free filings and lower need for services that assist do-it-yourself filers.Still, Morgan Stanley analyst Keith Weiss had expected Intuit to hit the high end of its implied consumer tax guidance as TurboTax continues to gain market share. Intuit shares have risen 14% since the start of the year, compared with a 3.3% advance in the S&P 500 Index.Tax-Prep Analyst Sees More Free Filers Hampering Revenue GrowthUnder current negotiations, closely-held Credit Karma would operate as a standalone unit with its Chief Executive Officer Kenneth Lin staying in charge, one person told the paper. The San Francisco-based company is backed by funds such as private-equity firm Silver Lake and financial-technology venture firm Ribbit Capital, it added.Credit Karma, which was co-founded by Lin, was considering an initial stock offering before late 2019 amid a series of weak-performing trading debuts, the newspaper said. Its website gives users access to credit scores and recommends financial products from credit cards to personal and car loans.Intuit is expected to report its second-quarter earnings on Monday.Credit Karma Changed Its Approach to Gain Customer Trust(Adds more details starting in third paragraph.)To contact the reporter on this story: Jihye Lee in Seoul at firstname.lastname@example.orgTo contact the editors responsible for this story: Shamim Adam at email@example.com, ;Liana Baker at firstname.lastname@example.org, Linus Chua, Sungwoo ParkFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
On Thursday, Morgan Stanley entered into a deal to buy E*Trade, the biggest acquisition by a major Wall Street bank since the 2007-2009 financial crisis. E*Trade has been the subject of M&A speculation for some time, especially after Charles Schwab Corp said it would buy TD Ameritrade Holding Corp last year. If Morgan Stanley terminates the deal due to antitrust issues, E*Trade would receive $525 million, Morgan Stanley said in a regulatory filing https://www.sec.gov/ix?doc=/Archives/edgar/data/895421/000095010320003111/dp121716_8k.htm.
Morgan Stanley's (MS) recently-announced acquisition with E*TRADE Financial (ETFC) reflects the companies' strategic efforts for business expansion, unlocking growth opportunities.
(Bloomberg) -- It was hard for James Gorman to contain his exuberance.The chief executive officer of Morgan Stanley had just ended a decade-long drought of major takeovers by top U.S. banks with his surprise deal to buy E*Trade Financial Corp. for $13 billion. Across the industry, where it’s long been taboo to get “too big,” speculation was erupting that conditions had finally lined up for a wave of similarly hefty acquisitions.So when analysts asked how it all came together, the normally staid CEO paused for a moment.“I’ve just strained my vocal cords with all the excitement,” Gorman said on a conference call Thursday. “I must have been screaming from the rooftops or something.”Morgan Stanley’s announcement is being interpreted by analysts, investors and investment bankers as just the start of a long-predicted series of deals big enough to reshape the upper echelons of the U.S. financial industry. Many of the largest banks are wielding highly valued stock at a time that Silicon Valley innovators are looking to wrest away business. Mergers and acquisitions are one way for banks to both scale up and adapt.“The financial performance of the industry allows acquirers to transact from a position of strength,” said Anu Aiyengar, co-head of global M&A at JPMorgan Chase & Co. “More broadly, digital disruption is making it more important to optimize cost and efficiency.”Some observers also point to the prospect that regulation may stiffen after U.S. elections in November if a Democrat wins the presidency. The field of candidates seeking to challenge Donald Trump includes several who have vowed to rein in -- or even break up -- “too big to fail” banks.More than 40% of top bank executives said in a November study by EY that they planned to actively pursue a deal in the following 12 months. Roughly one-fifth of those executives said they’d use a merger to improve their talent pool, while others said they’d use it to enter new markets. They will have to announce any significant takeovers soon to clear regulatory hurdles and complete transactions by the start of 2021, or potentially take their chances with a new administration.‘Big Chance’Gorman had eyed the online retail brokerage for almost 20 years before everything lined up. For Morgan Stanley, the all-stock deal lands E*Trade’s direct-to-consumer digital capabilities as well as $360 billion of client assets. Gorman reassured analysts that his firm is already conferring with regulators -- such as the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. -- to win approval for the deal.“We wouldn’t be entering into this if we didn’t think, from a regulatory perspective, this would be viewed favorably,” Gorman said. “That’s not something we would put to big chance.”In recent years, regional lenders have made most of the transformational deals in U.S. banking as they try to bulk up to improve earnings, weather the impact of low interest rates on margins and fend off tech startups. Last year saw the combination of SunTrust Banks Inc. and BB&T Corp., which emerged as Truist Financial Corp., the sixth-largest U.S. commercial bank.While Gorman said he still sees E*Trade as a so-called bolt-on acquisition, the price is significantly larger than the takeovers the largest banks have emphasized in recent years to augment business lines. It may open the way for rivals to seek larger targets too.“It’s all about growth,” said Julien Courbe, PwC’s financial services advisory leader in New York. “A lot of the banks have addressed their cost structure and continue to do so, but they are looking to get volume and scale, and that’s forcing considerations for deal activity.”Other IndustriesMatchmakers have proposed a wide variety of large takeovers by big U.S. banks over the past decade only to be disappointed. Some suggested, for example, that credit-card lender Discover Financial Services could make a juicy target for a variety of large consumer banks. Reuters Breakingviews floated the idea two years go that Goldman Sachs Group Inc. should buy Bank of New York Mellon. When ValueAct Capital Management later bought a stake in Citigroup Inc., analysts suggested the activist fund could push the bank to buy another of its holdings, Alliance Data Systems. The deals never materialized.It’s not just banks seeking to grow through mergers and acquisitions. The two biggest U.S. life insurers, MetLife Inc. and Prudential Financial Inc., are both open to acquisitions even as they seek to divest in slower-growth areas. Both firms struck deals last year, with Prudential agreeing to buy a startup consumer platform for $2.35 billion, while MetLife acquired a pet insurance administrator and a digital estate planning service.Leaders of payments companies also have said they’re looking to participate in the industry’s consolidation. Mastercard Inc.’s CEO Ajay Banga compared his business development team to “gnomes in Santa’s shop” that bring him as many as 60 deals in a year to consider. FleetCor Technologies Inc., a fuel card provider, has said it has a list of “big elephants” it hopes to bag.Wealth managers and robo-advisers are also appealing targets because of their relatively stable revenue, which can offset volatility from trading businesses. Goldman Sachs bought United Capital for $750 million last year, while Morgan Stanley beefed up its wealth division by buying stock-plan administrator Solium Capital Inc. for $900 million.Buyers aren’t the only ones under pressure. Charles Schwab Corp.’s acquisition of TD Ameritrade Holding Corp. in November reshaped the brokerage industry and encouraged E*Trade to consider a sale. Goldman Sachs Group Inc. was among firms that also took at least a cursory look at E*Trade before giving it a pass, according to people with knowledge of the matter.“Frankly, if I’m on the E*Trade board I’m certainly feeling a sense of urgency to find a buyer,” Thomas Bradley, the former president of TD Ameritrade, said at the time.Still, Gorman cautioned that it’s unlikely that the biggest banks will try to pull off transformational deals. They will instead stick to targets that add capabilities or round out businesses. And not every firm, he noted, has the means to shop.“You’ve got to be in the condition to do it, your stock has to reflect the value of the company, you have to have momentum that investors want to see,” Gorman said in an interview on Bloomberg Television. “But these bolt-on acquisitions. Listen, if they make sense? Absolutely.”\--With assistance from Sridhar Natarajan and Sonali Basak.To contact the reporters on this story: Jenny Surane in New York at email@example.com;Lananh Nguyen in New York at firstname.lastname@example.org;Nabila Ahmed in New York at email@example.comTo contact the editor responsible for this story: Michael J. Moore at firstname.lastname@example.orgFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Morgan Stanley’s $13 billion deal to acquire E*Trade Financial Corp. is driven in part by the bank’s need to meet equity investors’ demands for the latest technology and digital trading tools -- and the same forces are reshaping the fixed-income market.A report released Thursday by Greenwich Associates found an appetite for “new and better digital products and tools” among fixed-income investors is fueling competition at banks. Kevin McPartland, head of market structure and technology research at Greenwich, said the elimination of trading commissions by many firms including Charles Schwab Corp. has freed investors to choose a brokerage based on services alone.“A lot of it is based on the tools you provide to the end-user, and I’m not sure the institutional market is much different any more,” he said in an interview. “Compute power is effectively limitless at this point.”In earlier research, Greenwich asked investors how they choose a top-tier bank, and 18% of respondents said technology services like execution algorithms and analytics were a factor. Breakthroughs in artificial intelligence, machine learning and the ability to mine huge pools of data have radically changed investing, McPartland said.The E*Trade deal, announced Thursday, helps Morgan Stanley add clients who are less wealthy than its traditional customers, but a state-of-the-art platform for investors was another draw. Morgan Stanley Chief Executive Officer James Gorman cited E*Trade’s “innovation in technology” as a reason for the acquisition, according to a statement.\--With assistance from Sridhar Natarajan.To contact the reporter on this story: Matthew Leising in Los Angeles at email@example.comTo contact the editors responsible for this story: Michael J. Moore at firstname.lastname@example.org, Dan Reichl, Josh FriedmanFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Analysts say the Morgan Stanley and E-Trade tie-up is a matter of survival in a brokerage industry crushed by technology-driven trends in retail investing.
Morgan Stanley and E-Trade merger. We then dive into some quarterly earnings results from the likes of Avis Budget Group. The episode then closes with a dive into why Everi Holdings Inc. (EVRI) is a Zacks Rank 1 (Strong Buy) stock right now...
(Bloomberg) -- Morgan Stanley’s merger a quarter century ago with a brokerage that had branches in Sears was met with sneers. Wall Streeters joked it was a deal combining white shoes with white socks.But with the painful Dean Witter Discover deal now ancient history, the firm is taking another stab at luring mom-and-pop investors: a $13 billion acquisition of E-Trade Financial Corp., the discount brokerage that shot to prominence in the day-trading heyday of the 1990s.Like his predecessors, Chief Executive Officer James Gorman is using mergers to reshape the bank for a daunting new era. Morgan Stanley’s tie-up with Dean Witter Discover in 1997 was followed by the purchase of Smith Barney in 2009, a deal that cemented its pivot to managing people’s money as a source of growth.“I worked for a guy who used to say there is no birth without blood and pain,” former CEO Phil Purcell, who left Morgan Stanley in 2005, said in an interview. “Dean Witter was painful. Smith Barney was very painful. It was also the right strategic move.”And the roughly 30% premium Morgan Stanley is dishing out for E*Trade?“They are paying a premium for a company that is a fraction of market value,” the 76-year-old former CEO said. In 1999, “there were people who were gods on Wall Street at the time saying we should acquire Charles Schwab. That would have been a catastrophe,” he said, referring to Schwab’s valuation relative to Morgan Stanley.“Everything James Gorman has done has been right,” Purcell said.Big financial companies are in a race to lure small investors with digital services that many view as the industry’s future. Goldman Sachs Group Inc. is making its first forays into the world of retail finance, and even itself considered a deal with E*Trade before giving it a pass, according to a person with knowledge of the matter.Skeptical InvestorsMorgan Stanley’s E*Trade takeover is the industry’s biggest since being saddled with regulations that crippled some of its signature businesses in the wake of the financial crisis. Gorman spent his first decade atop Morgan Stanley reshaping the white-shoe firm into a wealth-management colossus that’s tried to diminish its exposure to the vagaries of the trading and investment-banking operations that dominate Wall Street.Now he’s taking a leap into a digital-banking future that could draw in millions of customers and give Morgan Stanley a springboard to go international with new banking products.Investors and some analysts are still skeptical.“The plain old timing of this deal is not ideal,” Mike Mayo, an analyst at Wells Fargo & Co., said in a Bloomberg Television interview. “After seeing so many of these marriages go afoul, we have more of a skeptical hat on.”Shares of Morgan Stanley slumped as much as 4.4% after the deal was announced, though Gorman said he expects that decline to be short-lived.“We just bought a $13 billion business,” he said in an interview. “The fact that shares are down a few percent is not surprising. I don’t expect that to be a permanent state.”Digital DemandThe all-stock takeover adds E*Trade’s $360 billion of client assets to Morgan Stanley’s $2.7 trillion, the companies said Thursday in a statement. Morgan Stanley also gets E*Trade’s direct-to-consumer and digital capabilities to complement its full-service, advisory-focused brokerage.“Our clients increasingly want digital access and digital banking, and their clients want wealth-management advice,” Gorman said. “A number of stars aligned.”In reshaping the firm since the financial crisis, Gorman has been emphasizing Morgan Stanley’s wealth-management powerhouse. Purchasing E*Trade helps him add clients who are less wealthy than its traditional customers. The New York-based company has lost some business to the retail brokerages in recent years as those firms invested heavily in their web platforms.Upheaval in the retail-brokerage industry also helps explain the timing. In early October, Charles Schwab Corp. eliminated commissions for U.S. stock trading, spurring other brokerages to follow suit and sweeping away an important revenue stream.The following month, Schwab agreed to buy rival TD Ameritrade Holding Corp. for about $26 billion and create a mega-firm with $5 trillion in assets, forcing smaller brokerages like E*Trade to contend with a much more formidable competitor.\--With assistance from Nabila Ahmed, Yalman Onaran, Vonnie Quinn and Guy Johnson.To contact the reporter on this story: Sridhar Natarajan in New York at email@example.comTo contact the editors responsible for this story: Michael J. Moore at firstname.lastname@example.org, Steve Dickson, Daniel TaubFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.