E-Trade Not Likely To Be An M&A Play…Yet

November 29, 2019 | Takeovers and Buyouts

Charles Schwab’s acquisition of TD Ameritrade puts paid to E-Trade’s deal-making hopes.

According to the New York Post, which quoted informed sources, E-Trade is unlikely to be in merger play now that the two largest brokerages have joined forces.

There have been rumors floating that investment bank Goldman Sachs was looking to acquire E-Trade or U.S. Bancorp to boost its retail exposure. Supposedly, E-Trade had even shopped itself to Goldman but the proposal did not cut much ice with the latter. Notably, Goldman set up an online consumer bank Marcus in 2016. This bank had more than 1.5 million customers while E-Trade has 3.5 million accounts and $346 billion under management.

However, a private equity investor in the know also said there was little chance of a deal between E-Trade and Goldman, according to the NY Post.

E-Trade CEO Mike Pizzi puts on a brave face

CEO Mike Pizzi is going to counter tough times from commission-free trades by cutting down on avoidable expenditure. These could be axing the use of paper mailings and to discontinue real-time market data and research to non-premium customers.

Pizzi also is of the view that he will gain new accounts as a result of departure of dissatisfied customers from the Schwab-TD combine.

Unfortunately, he clearly has tough times ahead. According to ETF.com managing director Dave Nadig, the merger would create a $100 billion powerhouse that would have the financial muscle to challenge the largest US banks.

More consolidation ahead

According to Greg Peterson, PwC partner, the merger could trigger further consolidation among discount brokerages. Deal-making could spread into other corners of financial services. “The lines are being blurred — asset managers are buying insurers, brokerages are buying asset managers,” he said.

Meanwhile, other views suggest that small and marginal brokerages would go out of business.

One idea – Schwab itself may scoop up E-Trade.

[Related Story:  Charles Schwab Looks to Purchase TD Ameritrade ]

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