With foreclosures up, discount brokerage E*Trade Financial Corp. is getting out of the mortgage business while it still can. With the mortgage baggage out of its attic, is E*Trade preparing itself for a merger?
David Trone, a Fox-Pitt Kelton Cochran Caronia Waller (USA) LLC analyst, told MarketWatch it's a strong possibility. "Questions about E*Trade's mortgage exposure have probably made some potential suitors hesitant up to this point," Trone said. "E*Trade's restructuring plan makes them more attractive rather than less as a potential buyout candidate."
Only one month ago, E*Trade was reportedly in talks about a union with competitor, T.D. Ameritrade Holding Corp.
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"Of all the online brokerage firms, these two look the most alike," Robert Ellis, an analyst at Celent LLC, told TheDeal.com last month. "They're both customer-based, have similar tools and similar pricing scales." However, Ellis added that there are differences between the two, namely, E*trade's pursuit of a more diversified strategy, and that it now makes more money from its banking side than brokerage. MarketWatch noted more specifically that Ameritrade expressed concern about E*Trade's mortgage exposure.
E*Trade announcement follows the likes of Ameriquest Mortgage Co. and Novastar Financial Inc. The move comes on the heels of sobering news that there was a total of 243,947 foreclosure filings in August, according to U.S. Foreclosure Market Report. That's a 36% increase from the previous month and a 115% jump from the same year-ago period. — Gerald Magpily
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Tags: brokerage, sub prime lending
