E-Trade Financial yesterday said it will buy BrownCo from JPMorgan Chase for $1.6 billion, a move that intensifies its rivalry with Ameritrade...
NEW YORK — E-Trade Financial yesterday said it will buy BrownCo from JPMorgan Chase for $1.6 billion, a move that intensifies its rivalry with Ameritrade for dominance in the online brokerage market.
The acquisition comes amid rapid industry consolidation as competitors slash fees in an effort to win customers and boost trading volumes, which have declined heavily since the dot-com bubble burst four years ago. This past summer, both E-Trade and Ameritrade announced plans to take over smaller firms.
Shares of E-Trade rose 89 cents to $17.22 yesterday.
Jarrett Lilien, E-Trade’s president and chief operating officer, said adding BrownCo’s 200,000 clients — whose average account balance of more than $145,000 is the second highest in the sector — will improve the overall quality of its customer accounts.
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“We also believe that they are more open to taking other products, and we have those other products, particularly the cash products on the banking side,” he said.
While BrownCo has a relatively small account base, E-Trade gains a “much-needed” customer segment of active traders with high cash balances, said Lauren Bender, senior analyst at financial-consulting group Celent.
BrownCo’s clients trade an average of 36 times a year, about six times as frequently as the current E-Trade customer.
Coupled with its August purchase of Harrisdirect from BMO Financial Group for $700 million, E-Trade also stands to see expanding profit from growing trading volume as its system becomes more efficient, Bender said.
The company said it will average almost 160,000 trades per day after the deal closes.