Online brokerage sells $3 billion in mortgage-backed investments, exits institutional trading business after shares hit all-time low.
Troubled discount brokerage E-Trade Financial Corp. said Wednesday it sold about $3 billion of mortgage-backed securities and municipal bonds in addition to the November sale of its $3 billion asset-backed securities portfolio.
The sale is part of a restructuring plan to reduce risk to E-Trade's balance sheet and maintain capital levels, R. Jarrett Lilien, the company's acting chief executive and president, said in a statement.
Like many other financial institutions, E-Trade has struggled with the rapid deterioration in the mortgage and credit markets. In November, the brokerage firm disclosed it would take a writedown on a portfolio of bonds and debt backed by mortgages. Mortgages have increasingly defaulted in recent months, leading banks and other financial institutions to cut the value of their holdings.
E-Trade shares dropped 58 percent the day after the initial writedown announcement in November, but have been steadily declining since July. The stock hit an all-time low Tuesday, but was up more than 10 percent in premarket trading Wednesday.
The latest sale of mortgage-backed securities and municipal bonds will result in a loss of less than $5 million.
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