Cutbacks Crack E*Trade

E*Trade Financial(ETFC Quote) slumped 10% late Monday after the online broker slashed its earnings guidance and became the latest company to drop out of the wholesale mortgage business.

E*Trade said in a release after the market closed that it was exiting or restructuring "noncore businesses that lack a direct or strategic connection with its retail customers."

Among other things, the company is boosting its provision for loan losses "due to charge offs expected as a result of the disturbance in the credit markets." E*Trade expects mortgage loan charge-offs of $95 million and a bad loan provision of $245 million.

The company is also exiting its wholesale mortgage operations, streamlining its direct mortgage lending business to focus on the retail franchise and restructuring its institutional trading business.

E*Trade did not say how many positions will be eliminated in the restructuring. Severance and other exit charges are expected to total $32 million, mostly in the fourth quarter, it said.

As a result of the restructuring, E*Trade expects to make between $1.05 and $1.15 a share -- down from its previous forecast of $1.53 a share to $1.67 a share.

The news comes just one month after the New York-based company said that its "financial health" was sound, in response to a selloff that started when investors worried the company was facing possible mortgage-related writedowns.