E*Trade Financial ( ETFC) investors and analysts continue to await word of the online brokerage's federal bailout application, but four months later are none the wiser.

Standard & Poor's on Tuesday reiterated that E*Trade and its bank subsidiary remains on "CreditWatch Developing," as it holds off on further assessing the company's debt ratings ahead of the government's decision on an application for as much as $800 million in Troubled Asset Relief Program funds. S&P originally placed E*Trade on credit watch on Dec. 22. It said at the time that E*Trade's ratings were tied to the fate of the TARP application.

E*Trade said it was optimistic that it would receive approval when it applied for the funds in November, but so far none has been given.

"Our ratings on E*Trade and E*Trade Bank reflect serious challenges they face in servicing a large amount of high-cost debt at the holding company," S&P's credit analyst Charles Rauch said in a report. "The company has not been profitable during the past two years. We expect profitability and cash flow to remain weak in 2009 as the company continues to address asset-quality problems in its large mortgage loan book."

That said, early delinquencies in E*Trade's home equity portfolio could be stabilizing, according to monthly loan metrics released two weeks ago.

S&P said that the TARP approval "would likely be conditional upon additional capital raising activities," according to the report. If the application is denied and it doesn't secure fresh equity from an outside source "there is risk of a loss of confidence from customers," the report said.

The company did not immediately return a call for comment Tuesday. Shares were rising 5.2% to $1.22 in recent trading Tuesday.

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