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E*TRADE Financial Corporation’s Balance Sheet Analysis

Jan 9, 2008 Investment Opinions, U.S Hot Stocks

After taking out the citadel deal, on etrade’s balance sheet, they still have 1.2billion CMO and 32billion loan receivable. Among 32 billion loan receivables, 12 billion home equity loan, 16 billion 1~4 family loan. Among 12 billion home equity loan, 6.4 billion is with LTV >80%. Among 16 billion 1~4 family loan, 0.5 billion is with LTV >80%. With housing price down more than 20%, it make economic sense for the borrower to default on loans with LTV>80%. So sum it up, assuming etrade write off those 1.2 billion CMO + 6.4 billion home equity loan + 0.5 billion 1~4 family loan, that’s total 8.1 billion write down. That’s about $15 per share write off.

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