Embattled online brokerage E*Trade is to apply for a hand-out from the US government's bank recapitalisation programme after recording a worse than expected third quarter loss of $50 million.
In a trading statement, the firm - which has been badly burned by the US mortgage crisis - says it has determined it is "eligible for the government's Capital Purchase Programme and will be following up with the appropriate governmental agencies".
For the third quarter E*trade posted a net loss of $50.5 million, or nine cents a share, a slight improvement on the $58.4 million, or 14 cents a share, it lost in the same period the previous year. Net revenue was $378 million, down from $482 million a year ago.
The Q3 results include net proceeds of around $660 million through the sales of its Canadian business to Scotiabank and stake in Indian firm IL&FS Investsmart to HSBC.
Excluding the sale proceeds, losses per share from continuing operations were 60 cents, far higher than analyst predictions.
Provision for loan losses were up $199 million from the previous quarter to $518 million, mainly driven by higher expectations for future charge-offs. The company has now increased its three year 2008-2010 cumulative loss assumption for home equity by approximately 20% from its previous $1.5 billion estimate.
However, E*Trade says provision expense has peaked in the third quarter and that charge-offs will begin to improve in 2009, although it warns it does not expect to make a profit in the fourth quarter.