Wow – E-trade is taking a pounding following a combination of announcements about “continued declines” in the value of its $3bn asset backed securities portfolio and analyst downgrades.
It has lost $9.2bn in market value since July now standing at $1.5bn. This won’t be helped by Citigroup, which has issued an analyst report declaring a 15% probability of E-trade winding up in bankruptcy, further noting that
– 50% of e-trade deposits exceed $100k Federal deposit protection, equating to $15bn of deposits and accounting for 25% of e-trade funding.
– were investors to withdraw uninsured funds, e-trade would be forced to unload assets, incurring further losses with an enforced wind-down of their book, losses which they put at $5bn
– $12.5bn mortgage book expected to experience significant reduction in value
Hmmm. So if you were an e-trade customer, would you sit on your hands or get out quick just in case. After all, they aren’t handing out medals for bravery in this situation!