The traditional banks are under attack. Their industry is changing rapidly due to technology meaning many long term institutions could be facing extinction. Obviously, to survive, those entities will have to change.
Morgan Stanley's acquisition of E*Trade is showing how different the institutional banking sector is becoming. In fact, the reason for the this deal, from Morgan Stanley's perspective, is to access the retail investor. Institutional money is getting tougher to get a hold of.
E*Trade was also facing their own issues. The company was suffering from a lack of growth over the last few years. Other online brokers were picking up more of the newer customers.
A recent development most likely really pushed E*Trade's hand. The wild success of Robinhood, with its zero fees, took the retail market by storm. Being one of the weaker entities in the sector, means the company was suffering more than the others.
The $13 billion, all stock deal was good for E*Trade. Perhaps Morgan Stanley overpaid a bit but diversifying from its traditional business does not come cheap. The entire industry is getting highly competitive. Trading operations across the board have seen a decrease in revenues over the past decade for all the major Wall Street banks.
This comes on the heels of HSBC announcing that it is laying off 35,000 employees over the next three years as it tries to restructure its operations in an effort to stop the bleeding that it experienced. That bank saw its revenues drop by over 30% from 2018 to 2019.
The entire industry is also facing a very real threat from global decentralization of finance. DeFi is one of the fastest growing segments in cryptocurrency. Third world nations are getting access to financial services without going through the mainstream banking system. Finally, it is expected that the largest asset segment will be digital assets, something that banking is slow to adopt.
It is safe to presume that, in a decade, the entire industry will look remarkably different.
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Posted via Steemleo