Report: E*Trade in Sale Talks

The online broker could be close to a long-rumored deal.
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E*Trade Financial

(ETFC) - Get Report

shares surged 25% after

CNBC

reported that the troubled online brokerage firm is talking with at least two competitors in hopes of selling itself.

According to

CNBC

, E*Trade is discussing a possible deal with

TD Ameritrade

(AMTD) - Get Report

and

Charles Schwab

(SCHW) - Get Report

, along with several other interested parties.

Speculation about such a deal, rumored since earlier this year, heated up again after the company almost two weeks ago said it would take further writedowns. If E*Trade were to seal the deal with TD Ameritrade, its parent company

TD Bank

could buy the retail banking and mortgage assets, while the Omaha-based brokerage would likely pick up E*Trade's brokerage assets,

CNBC

reported.

E*Trade, which provides online banking, brokerage and lending to retail and institutional customers, joined the likes of

Countrywide Financial

(CFC)

and

Washington Mutual

(WM) - Get Report

and other smaller lenders hit hard by the housing downturn and mortgage deterioration, particularly as the secondary market for mortgages ground to a halt.

Two weeks ago, E*Trade said it will take further writedowns on its collateralized debt obligations, or CDOs, and second-lien securities portfolio.

E*Trade and TD Ameritrade spokeswomen both declined to comment.

TD Ameritrade-E*Trade Combo No Sure Thing

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The company is also facing a

Securities and Exchange Commission

investigation into its loan and securities portfolios.

Shares have lost more than 80% of their value this year -- a large chunk of which came two weeks ago after a Citigroup analyst suggested

there could be a run on the company's bank.

Other observers have suggested that the firm may need to sell certain assets -- or the entire company -- to recover from the losses.

Market chatter earlier this year had TD Ameritrade and E*Trade discussing a possible merger. TD Ameritrade has been pressured by two big activist hedge funds to merge with an industry peer, namely E*Trade or Schwab.

Shares were recently up 18.3% to $5.04.