Monday, November 12, 2007

Investor assets said safe in E-Trade accounts (ETFC)

Two stories from the Dow Jones empire, the first from MarketWatch:

As investors shaved more than half the value from E-Trade Financial Corp. shares Monday, financial advisers, regulators and the company said that account holders have several layers of protection, and in general do not have to fear that the current problems will cause customers losses....MORE

And from the Wall Street Journal Online:

E*Trade Shares Plummet
On Fears, Write-Downs
...The selloff had its roots in E-Trade's warning in a securities filing Friday that the value of its holdings of securities backed by home mortgages had fallen significantly and will lead to bigger than expected write-downs in the fourth quarter. E-Trade didn't quantify the losses, but said they would keep it from meeting its earnings target and said it couldn't provide a new one.

In addition, E-Trade said the Securities and Exchange Commission has opened an informal inquiry related to issues with its loan and securities portfolios. E*Trade uses some $40 billion of customer cash from its bank and brokerage to make investments. The company said its $3 billion portfolio of asset-backed securities includes about $450 million of so-called collateralized debt obligations and second-lien securities.

In a note to clients, Citigroup analyst Prashant A. Bhatia argued E-Trade could have difficulty holding on to market-savvy customers with more than the federally insured maximum of $100,000 on deposit, particularly as discount brokerage competitors don't pose the same risks. In valuing the stock, Mr. Bhatia built in a 15% chance E-Trade will declare bankruptcy....MORE