Axos Financial has agreed to buy E-Trade Advisor Services (EAS) from Morgan Stanley for $55m in cash, through its wholly-owned subsidiary Axos Clearing.
The transaction is expected to close in the third quarter of 2021.
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The acquisition will add 200 RIA custody relationships and $23bn of combined assets under custody to the Axos.
Axos Financial president and CEO Gregory Garrabrants said: “We intend to leverage EAS’ turnkey technology platform and Axos Clearing’s capabilities to expand the service offerings to independent registered investment advisors and turnkey asset management programme managers.
“The $1.2bn of client cash deposits adds another potential source of low-cost funding and optionality for Axos Bank.”
Axos said it is funding the acquisition with existing capital.
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By GlobalDataAccording to Garrabrants, the deal is expected to add 5% to the company’s fiscal 2023 earnings per share with a tangible book value earn-back of approximately three years.
“The RIA custody business is an integral part of our strategic plan and adding a team of experts with decades of experience and relationships with the RIA community is something we highly value. We look forward to investing in and growing the EAS team to support their high-touch service model,” he added.
The RIA custody business was acquired by Morgan Stanley as part of its $13bn takeover of discount brokerage E*TRADE Financial last year.
Morgan Stanley reported record net revenues and net income in Q1 2021, beating estimates, with growth across all its business lines mainly investment banking.
The New York-based investment bank registered net income of $4.12bn, or $2.19 a share, compared to $1.7bn, or $1.01 a share, in the prior year.
