Morgan Stanley to Jump-Start Deposit Growth With E*Trade Deal

(Bloomberg) -- Morgan Stanley has struggled in the past four years to increase the share of deposits in its funding mix. Now, with the acquisition of E*Trade, that’s about to change.

The share that deposits represent in Morgan Stanley’s funding mix will jump to 26% with the purchase, up from last year’s 21%, a level where the figure had lingered for years. That’s because E*Trade is adding $56 billion of client deposits to Morgan Stanley’s $190 billion.

Deposit growth hasn’t come easily for Morgan Stanley. Even though it became a bank holding company at the height of the financial crisis, the firm’s roots as an investment bank and wealth manager meant retail deposits remained a small portion of the mix. Deposits are desirable: They’re a cheap form of funds in the current low-interest-rate environment, and they’re treated as more secure than alternatives under post-crisis regulations.

To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Daniel Taub, Steve Dickson

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