Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers -- Ignore unavailable to you. Want to Upgrade?

To: loantech who wrote (52777)	11/12/2007 10:23:48 PM
From: Rocket Red	Read Replies (2) \| Respond to of 78404

E-Trade shares plummet on credit writedown, analyst says bankruptcy a possibility Stephen Bernard, THE ASSOCIATED PRESS November 12, 2007 NEW YORK - Shares of online brokerage E-Trade Financial Corp. lost more than half their value Monday, with a Citigroup analyst saying customers were poised to flee and the company was at risk of bankruptcy. Other analysts said the pictures was not as bleak, though, and the company said assets actually improved in October. It also moved to reassure customers that it could withstand a substantial writedown of assets and remain in business. Shares of E-Trade tumbled 58.7 per cent, to US$3.55. Earlier in the session, shares fell as low as $3.50. Shares had traded between $8.02 and $26.08 during the last year. The online brokerage company said Friday afternoon it would take an undisclosed writedown on a portfolio of securities and collateralized debt obligations, known as CDOs, backed by mortgages. E-Trade said it has a $3 billion portfolio of asset-backed securities, which includes about $450 million in complex financial instruments known as CDOs and second-lien securities. As the mortgages backing those investments have increasingly defaulted, the value of those securities declined, forcing firms to write down their value. Jarrett Lilien, E-Trade's president and chief operating officer, said in a letter to clients Monday the firm could handle an immediate writedown of $1 billion and "still remain well capitalized." Lilien added the company is taking "prudent measures to effectively manage the company's balance sheet." Early Monday, Citi Investment Research analyst Prashant Bhatia laid out a worst-case scenario for E-Trade, saying the writedowns and a Securities and Exchange Commission inquiry could lead to a significant number of clients closing accounts. Bhatia pegged E-Trade's chances of filing for bankruptcy at 15 per cent. But other analysts said the risk of a run on deposits was fairly low, exacerbated only by the Citi note itself. Fox-Pitt, Kelton analyst David Trone said the risk of such a run was five per cent before the Citi note but more like 20 per cent afterward. Trone also discounted the chance of bankruptcy, though he said a $4 stock price implied a prediction by the markets of a 65 per cent chance of insolvency. "The board would likely sell (E-Trade) before allowing bankruptcy," he said in a client note. E-Trade was not available to comment on the Citi note. Bhatia was traveling and not available to comment, Citi said. Despite the gloomy predictions, E-Trade actually added accounts in October, the company reported Monday. E-Trade ended October with 4.7 million accounts, about one per cent more than it had the previous month. Of the total accounts, about 1.07 million were deposit and lending accounts. Those are the accounts Bhatia said could dwindle soon. Repetto expects E-Trade to look for alternatives to deal with the weakness at its bank, including a capital infusion similar to Bank of America Corp.'s August investment in Countrywide Financial Corp., a sale of bank assets or a sale of the company all together.