E*Trade Sells Troubled Assets

The struggling online broker shed $3 billion in mortgage-related securities and bonds.
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E*Trade Financial

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regained lost ground early Wednesday, as the online broker said it had sold $3 billion in hard-to-price mortgage-related securities and municipal bonds.

E*Trade said Wednesday that it managed to sell $3 billion of available-for-sale securities, including mortgage-backed securities and municipal bonds, and realized a loss of "less than $5 million" on the sale. A portion of the sale was settled last month, while the rest would be settled in the first quarter, it said.

Also, the company's home equity loan portfolio continued to run off as expected. Home equity loans were less than $12 billion at the end of the year, the company said.

E*Trade also reduced its wholesale borrowing levels by eliminating $3.5 billion in Federal Home Loan Bank advances and repurchase agreements. The company ended the year with $10.5 billion of excess borrowing capacity from the FHLB. It expects Tier 1 and risk-based bank capital to be at least 5.9% and 11.1% respectively for 2007, it said.

"We have taken important steps in the execution of our turnaround plan by reducing balance sheet-related risk and maintaining strong bank capital levels," said Jarrett Lilien, E*Trade's acting CEO and president.

Shares opened nearly 16% higher in Wednesday trading, despite falling 26% on Tuesday to an

all-time low, after investors feared that the New York-based broker would have to raise more capital. Recently, shares were up 8% to $2.43.

E*Trade has also formed a special committee to reduce the risk in the company's real estate portfolio. The special committee is lead by former


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executive Robert Burton, who recently joined E*Trade Bank as its COO.

While at Wachovia, Burton was the head of the Charlotte bank's retail credit businesses and products, which made him in charge of mortgage banking and home equity lending. Burton has also served in executive positions at

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