E*Trade: More Good News

Since I wrote about E*Trade (ETFC) last week, shares have crept up from $.66 to $1 (in pre-market action this morning; last night's close was $.91).

The Wall Street Journal put out a little article this (Tuesday) morning discussing a few monthly updates that ETFC released today. The article may (or may not, depending on if it's subscription-based) be seen here.

Not only did trading volume stay steady, but more importantly, loan delinquencies among its portfolio are on the DECLINE.

"The company said Wednesday delinquencies of 30 to 89 days have fallen 16% in the first two months of the current quarter, while delinquencies of 30 to 179 days are down 1%."

That is obviously wonderful news for ETFC. They have already provided loss provisions far beyond realized losses, so if things are bottoming (or improving) now, they might not have to increase provisions anymore, allowing them to return to profitability. This may sound a little crazy, but maybe write-ups are hiding in the not-too-distant future.

Comments

[OKMONEY:]

ETFC still is itself a subprime mortgagor. Those 12.5% springing lien notes they owe to Citadel from the November '07 rescue must be killing them. Anyone remember face amount of those Citadel notes? I recall over $1B, yes $B.

Mar 18 09:36 AM

[User 378476:]

Wrong! Etrade no longer deals in subprime - sold all of this to Citadel. Tell the truth okmoney - gesshh. Those notes are due in 2014 and on top of that the company has 1 Billion in reserves - very good Texas ratio and delinquencies were just reported way down so they can use the reserves for profit taking. The stock is over the hump.

Mar 18 09:41 AM

[Stockmajor:]

Maintaining my long position on ETFC.

Mar 18 09:56 AM

[Rohan C. Pease:]

Closing out my position in ETFC, selling into strength, up 52% since putting the position on Friday afternoon. Thank you to Steven, for the helpful insights.

Mar 18 10:18 AM

[Stephen Fra...:]

My pleasure Rohan (this is the author... just with a typo in the name!). I'd consider reentering after a pullback... things seem to be going well for the company.

Mar 18 10:25 AM

[User 378520:]

Stephen, Thanks for your articles. When two analysts downgraded a stock and putting a price target of .25 cents, I thought that IS THE SIGN. So I loaded up on etrade. I did the same with Netflix last year and reaping the gains now on that move. I hope Etrade gains would make my netflix gains small!

Go Etrade, Go!!

Mar 18 10:38 AM

[jbmaria:]

ETFC currently owes Citadel $2.1 Billion at 12.5% interest,planned to grow to $2.5 Billion in the next 2 years:


'We have the option to make interest payments on our springing lien notes in the form of either cash or additional springing lien notes through May 2010. During the second quarter of 2008, we elected to make our first interest payment of approximately $121 million in cash. During the fourth quarter of 2008, we elected to make our second interest payment of $121 million in the form of additional springing lien notes. We expect to make our next three interest payments, which equates to all interest payments on the springing lien notes through May 2010 in the form of additional springing lien notes. The November 2010 payment is the first interest payment we are required to pay in cash."

So,as of now they are on the hook for:
"1) The $1.9 billion in principal does not include the $121.0 million of capitalized interest in November 2008, which resulted in $2.1 billion in principal of springing lien notes outstanding to Citadel as of December 31, 2008."

Mar 18 11:14 AM

[Stephen Fra...:]

Readers - I appreciate the compliments. If you like my work, you can add me to your watchlist here - and bookmark my personal blog, studentstocks.blogspot...

On another note about ETFC, as of the last report, there were about 70 million shares short, representing about 8 days of volume. Price action today may be due to some short covering, but if good news keeps trickling in the squeeze will be enhanced.

Mar 18 11:25 AM

[OKMONEY:]

On Mar 18 11:14 AM jbmaria wrote:

> So,as of now they are on the hook for:
> "1) The $1.9 billion in principal does not include the $121.0 million
> of capitalized interest in November 2008, which resulted in $2.1
> billion in principal of springing lien notes outstanding to Citadel
> as of December 31, 2008."

Thanks JB; I can always count on you for the true facts.

Mar 18 03:00 PM

[wholesalecd:]

OKMonkey wrote: ETFC still is itself a subprime mortgagor...

First of all learn to spell and do a little research. Actually you don't even have to do research to know ETRADE isn't doing Sub-prime mortgages any more.

So you lost on your shorts I take it....??????

Mar 18 06:43 PM

[OKMONEY:]

On Mar 18 09:41 AM User 378476 wrote:

> Wrong! Etrade no longer deals in subprime - sold all of this to
> Citadel. Tell the truth okmoney - gesshh. Those notes are due in
> 2014 and on top of that the company has 1 Billion in reserves - very
> good Texas ratio and delinquencies were just reported way down so
> they can use the reserves for profit taking. The stock is over the
> hump.

USER378476:
Learn the difference between the words; "mortgagor" and "mortgagee". When you've mastered that distinction read my post again; then, read JBMARIA's post to find the "truth". ETFC owes just like a subprime mortgagor, just like I said.

Mar 18 06:53 PM

[OKMONEY:]

WHOLESALECD:
you're another poster who does not know the difference between "mortgagor" and "mortgagee". Look it up; educate yourself. BTW I'm way long ETFC; have been since 12/07


On Mar 18 06:43 PM wholesalecd wrote:

> OKMonkey wrote: ETFC still is itself a subprime mortgagor...
>
> First of all learn to spell and do a little research. Actually you
> don't even have to do research to know ETRADE isn't doing Sub-prime
> mortgages any more.
>
> So you lost on your shorts I take it....??????
>

Mar 18 06:56 PM

[JohnnyM:]

All we have to do is load up on some cheap stock and play the long game. Etrade is going up for various reasons and all of them are indeed positive for the long term.

This game is just warming up and the short game will add some sizzle. Try not to get bogged down by the tiny details, they will become green in time.

The analysts will have to cover soon along with their buddies. If the short game on Etrade is anything like Citigroup's shafted short players, we will be looking at a $10 stock in two weeks!

JM

Mar 18 09:56 PM