Magazine article American Banker

E-Trade Discloses Holdings to Calm Investors' Jitters

Magazine article American Banker

E-Trade Discloses Holdings to Calm Investors' Jitters

Article excerpt

E-Trade Financial Corp. says that it has suffered no ill effects so far from the broadening liquidity crisis.

The online brokerage and banking company derived 57.9% of its second-quarter revenues from spread income - largely from an investment portfolio in which mortgage assets predominated - and its share price has been hammered by concerns about mortgage exposure. In response E-Trade late Thursday joined a growing list of companies that have disclosed extensive details of investment holdings and funding sources to reassure investors.

E-Trade's stock lost 26.8% of its value from Aug. 1 to close at $13.55 a share Thursday, when it traded wildly within a range of $9.92 to $14.20 on extraordinary volume. On Friday, the stock regained 7.01% to close at $14.50.

In its statement Thursday, the New York company said it "has seen no material changes ... with respect to the availability, pricing, or margin on its wholesale funding sources, including repurchase agreements."

The $38.6 billion of loans it held on June 30 were 65.8% of its earning assets, E-Trade said. The credits included $7.4 billion of margin loans; $15.7 billion of first-lien mortgages with an average FICO score of 738 and combined loan-to-value ratio of 68%; and $12.4 billion of second-lien mortgages with an average FICO of 731 and combined loan-to-value of 80%.

The company said almost all of its $12.7 billion in mortgage-backed bonds - or 72.2% of its securities overall - were rated triple-A. The company said it had $89 million in unrated or junk securities.

Deposits of $27.8 billion were 47.4% of liabilities. The company said that its $12.4 billion in repurchase borrowings - its second-biggest liability - were mostly backed by agency securities. E-Trade also said that its $7 billion in Federal Home Loan Bank advances left it with $10 billion more to draw from that source. …

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