E*Trade Sale Faces Valuation, Regulatory Hurdles - WSJ

A possible sale of troubled online broker E*Trade Corp. (ETFC) hinges on how to value its weakening mortgage portfolio, the Wall Street Journal reported Monday. As of Sept. 30, E*Trade's mortgage portfolio, was worth $29.3 billion. It also owns mortgage-backed securities worth about $12.4 billion. So far, it has announced $197 million in pretax writedowns on its securities, and has put aside $238 million in loan-loss provisions. Sources say rivals looking at its books, including TD Ameritrade (AMTD) and Charles Schwab (SCHW), are concerned current valuations don't reflect the assets' depressed values, and would insist on a revaluation at a mark-to-market basis, although they admit the mortgages and related securities aren't likely as 'imperiled' as the current market suggests. E*Trade shares are down 77% over the past half year after the company warned four times about the falling value of its mortgage-based portfolio. One unknown factor that may affect its sale is what role federal regulators that over see its bank might play. The Office of Thrift Supervision, its overseer, could demand that the proceeds of a sale go back into the bank, leaving little for shareholders; it could also insist E*Trade find a buyer that insulates the mortgage portfolio from bankers.

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Comments

[lefty]

etfc is on my watch list. until the time to buy. which is when everyone is done bashing.