In a move that will further solidify its position as the nation's largest discount stockbrokerage, Charles Schwab & Co. said Wednesday that it has agreed in principle to acquire Rose & Co., Chase Manhattan Corp.'s discount brokerage subsidiary.
The deal, for which terms were not disclosed, will continue a trend of consolidation in the discount brokerage business, where the top national firms have gained increasing market shares at the expense of smaller, regional firms. That trend has continued since the October, 1987, stock market crash, although San Francisco-based Schwab and other larger firms also have had to cut employment and other costs amid reduced trading volume. Further mergers and consolidations are expected, analysts say.
Less Profitable Than Once Thought
The merger is yet another indication of how major banks have found that offering discount brokerage services to their banking customers is not as profitable or synergistic as previously hoped. That realization prompted New York-based Chase, the nation's second-largest banking firm, to disclose late last year that it was considering selling Chicago-based Rose, which it acquired in 1983. Merger talks between Schwab and Rose, one of the nation's 10 largest discounters, were first disclosed in January.
Schwab itself was spun off by BankAmerica Corp. in 1986, while Security Pacific Corp. has sought buyers for its discount brokerage unit.