Morgan Stanley's Gorman charts ambitious course with US$ 13 billion E*Trade deal

AKUISISI - NEW YORK. Morgan Stanley said on Thursday it would buy discount brokerage E*Trade Financial Corp in a stock deal worth about US$ 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, a business that Chief Executive Officer James Gorman has been trying to build out to insulate the bank from weak periods 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 President Donald Trump's administration, which has 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 President Barack Obama's administration.

In March last year, U.S. regional bank Fifth Third Bancorp's purchase of smaller rival MB Financial Inc for US$ 4.7 billion got a nod from regulators. It was followed by approval for a US$ 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 go through 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 as strict capital and liquidity rules were imposed on lenders with more than US$ 50 billion in assets, making it unattractive for mid-size firms to acquire more assets.