Posted on 11/12/2007 7:51:07 AM PST by Moonman62
Shares of E-Trade Fall on Plans for Mortgage-Related Writedowns in the Fourth Quarter
NEW YORK (AP) -- Shares of E-Trade Financial Corp. plunged in early morning trading Monday as investors worried over a Friday announcement the company would take larger-than-expected writedowns on its holdings of securities backed by home loans.
Shares of E-Trade fell 4.33, or 50 percent, to $4.26 in morning trading. Shares had traded between $8.02 and $26.08 during the past year.
Citi Investment Research analyst Prashant Bhatia cut E-Trade's rating to "Sell" from "Hold." Bhatia said there is a 15 percent chance E-Trade will have to declare bankruptcy and the company may be forced to sell loans and securities at a significant discount.
Bhatia said clients could also close deposit accounts, reducing the company's funding. Half of deposit accounts, representing about $15 billion, are higher than the Federal Deposit Insurance Corp.'s $100,000 threshold. Those are the most likely accounts to be closed if customers are worried about the company's future, Bhatia said.
E-Trade holds about $3 billion in asset-backed securities in a portfolio. Much of the portfolio is invested in securities backed by mortgages, which have increasingly gone into default in recent months, reducing the value of the securities. E-Trade did not disclose how big a writedown it would take in the fourth quarter.
The Liberal “Financial” Media treats every on of these “announcements” like they are surprises. Got to be the economy down, pave the way for a Democrat, don’t they?
Guess what? Most any company who has a lot of exposure to sub-prime mortgages is going to see losses.
The NEWS will be the bank who has exposure but manages through it to show a profit.
I was told last week that Commerce Bankshares has NO exposure to this.
this is huge, the market is pricing in a notable bankruptcy chance on etrade now.
I bet their ACAT department is having a bad day....
Cool. One of my banks. GFED is another.
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Actually, I think Hitlery was expecting all this to happen sometime around mid-08.
I think Bernanke has taken the wind out of her sails by letting it happen early. She's not going to get the mileage she expected out of this housing crunch IMO.
Couldn't resist.
We closed out three accounts with E Trade this morning. The 3 were above the FDIC threshold.
Should I close my brokerage account?
Someone in the MarktetWatch wrote an article on E-Trade today and called E-Trade the “Victim of Subprime Mortgage”
Had to be a liberal nut to write and use the word victim.
I would probably have done the same in your position.
Great day for commodity shorts. Hope someone on FR took advantage of my short calls on crude and gold last week. Down 4% and 3% respectively today. Even lean hogs are getting slaughtered thanks to Mr Bernake and the general panic.
Be careful with that. A lot of “dumb money” makes buy trades on low volume holidays. A lot of dumb money buys stocks headed toward zero as well.
ETFC today is anything but low volume.
But, I didn't invest too much in ETFC. This is more like a "fun trade".
However, I'm seeing a lot of over-reaction now. And I'm pretty sure this ETFC action is some of that.
For what it’s worth, here is what ETrade is telling its online customers:
However, you, our customers, should know that we continue to be well capitalized by regulatory standards. As a matter of fact, we could absorb an immediate write down in excess of $1 billion and still remain well capitalized. Nobody knows for certain what the ultimate impact will be from these markets, but it is our expectation that news in the market will get worse before it gets better and, armed with these expectations, we are taking prudent measures to effectively manage the company’s balance sheet.
We will continue to earn your confidence, providing state-of-the-art asset protection, including E*TRADE’s Complete Protection Guarantee, SIPC Protection for E*TRADE Securities customers and FDIC Insurance for E*TRADE Bank customers.
We appreciate the opportunity to continue to serve you and your investing needs.
—Jarrett Lilien
President, COO and Director, E*TRADE FINANCIAL
I think E*TRADE treats assets in the brokerage account differently. While you aren’t guaranteed against declines in value, you are protected against acts of fraud committed during the bankruptcy of a broker-dealer. Take a look at
https://us.etrade.com/e/t/estation/pricing?id=1209025020
for more information about protection limits (it deals with more than just their conventional bank accounts).
Fidelity and Schwab seem to be immune to it.
I would.
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