Continuing a wave of consolidation, E-Trade Financial Corp. said Thursday that it would buy BrownCo from JPMorgan Chase & Co. for $1.6 billion.
E-Trade is hoping the purchase will help build its base of wealthy, heavy-trading customers. The move comes the month after E-Trade agreed to buy Harrisdirect from Canada’s BMO Financial Group for $700 million. It also follows the decision by rival Ameritrade Holding Corp. to buy TD Waterhouse USA from Canada’s Toronto-Dominion Bank.
In May, Ameritrade spurned a takeover bid from E-Trade.
Analysts said the online brokerages were trying to bulk up to build economies of scale in a price-competitive field that also includes Charles Schwab Corp.
“It’s becoming a horse race among Schwab, Ameritrade and E-Trade,” said Robert Hansen, an equity analyst at Standard & Poor’s. E-Trade expects the BrownCo deal to generate about $91 million in cost savings and $63 million in revenue.
New York-based E-Trade last year had net income of $98.4 million, or 26 cents a share, on $409.5 million in revenue.
E-Trade shares rose 89 cents to $17.22. Ameritrade rose 63 cents to $21.41 and Schwab gained 15 cents to $14.25.
E-Trade stock is up 15.2% for the year, but has lagged behind Ameritrade, which has jumped 50.6%, and Schwab, which has gained 19.8%.
Harrisdirect and BrownCo will give E-Trade about 630,000 new accounts, with more than $60 billion in assets, bringing its total to 4.3 million accounts with $160 billion in assets.