At least one Wall Street analyst is doubting the "long-term viability" of

E*Trade Financial

(ETFC) - Get Report


Citigroup analyst Keith Walsh expressed the concerns regarding the beleaguered online broker in an industry note in which he initiated coverage on E*Trade and two rivals,

Charles Schwab

(SCHW) - Get Report


TD Ameritrade

(AMTD) - Get Report


Despite earnings headwinds created by the weak equity markets, slowing trading activity and contracting interest spreads, Walsh gave Schwab a buy rating and TD Ameritrade a hold rating. But Walsh slapped a sell rating on E*Trade.

"On the one hand,

E*Trade's retail brokerage operation is steady," Walsh writes in a note Wednesday. "The institutional business, however, remains an albatross as a result of its $25.5 billion loan portfolio. While we believe current management is doing all they can to address the company's legacy balance sheet issues, the long-term viability of the company remains in doubt, in our view."

In the final months of last year, investors became worried that the New York firm would not receive approval for a federal investment via the Troubled Assets Relief Program, or TARP. E*Trade filed an application for $800 million in funds in early November and has said publicly that it is "optimistic" of a TARP approval but still -- four months later -- no approval has been made.

The government's double investments in


(C) - Get Report


Bank of America

(BAC) - Get Report

suggest that both financial institutions are deemed too big to fail, but E*Trade seems to have been left in the dust. Some 450 banks and financial institutions deemed 'bank holding companies' received federal funds through the TARP initiative. And now some banks are even deciding that they don't want to deal with restrictions that come with TARP and have decided to give back the money.

Rumors floated late last year that the government does not want to be seen as bailing out E*Trade's largest investor

Citadel Investments

, given the large hedge fund's own troubles.

Shares of the company have fallen 85% from its 52-week-high of $4.53 on April 7. The stock was most recently down 2.9% to 66 cents.

Fox-Pitt Kelton Cochran Caronia Waller indicated on Tuesday that E*Trade may need more capital, according to a separate industry note in which the firm conducted stress tests on the bank subsidiaries of Schwab, E*Trade,

Raymond James

(RJF) - Get Report


Stifel Financial

(SF) - Get Report


The majority of E*Trade's mortgage loans and securities are "problematic vintages," Trone writes. He believes that E*Trade could have up to $785 million of losses from its loan portfolio and $232 million of unrealized losses in its securities portfolio.

In an immediate loss scenario, Trone writes that the company could see a decline in Tier-1 capital to 4.12% from 6.29% and a decline in the total risk-based capital ratio to 9.13% from 12.95%.

In an immediate loss scenario, "the analysis suggests that E*Trade is most likely to need additional capital, while Stifel is the least likely," he wrote. Yet none of the companies "would have an issue if losses were spread out over several quarters, given solid pre-provision earnings."

"This is most significant for E*Trade, which the market seems to believe will fall to insolvency at some point, while its brokerage unit continues to generate solid profits to buffer against chronic loan losses," Trone added. "This further reinforces our view that E*Trade's fate is largely dependent on the timing of the losses in its asset portfolio."

The analysis does not incorporate any additional capital from TARP. "Should the firm suddenly receive approval for TARP capital, we believe this would eliminate the potential capital shortfalls identified in our burn-down analysis," Trone wrote.

An E*Trade spokeswoman did not immediately respond to a phone message and email.