E*Trade’s chief executive, Mitchell Caplan, is the latest high-profile casualty of the US subprime crisis. Jarrett Lilien, the financial services firm’s president, has been named acting chief executive.E*Trade announced it will search for a permanent replacement, and will consider Lilien among the candidates.
This follows the stepping down of both Merrill Lynch and Citi’s chief executives over the past month, as firms shake up their management teams after suffering losses from the credit crisis.
Citadel will purchase E*Trade’s entire asset-backed securities (ABS) portfolio in a deal worth $2.5 billion. This transaction removes the assets with the greatest market risk from the firm's consolidated balance sheet. E*Trade said the deal would allow the company to focus on its core retail business, and would provide additional capital to manage credit risk.
"This transaction with Citadel is not only a major vote of confidence from one of the world's leading financial institutions, but also allows us to directly address customer concerns and get back to our real business, which is providing industry-leading products and services to our customers," said Lilien.
E*Trade had seen continued declines in the fair value of its $3 billion asset-backed securities portfolio, predominantly within ABS collateralised debt obligations (CDO) and second-lien securities. The total exposure to ABS CDO and second-lien securities on September 30, 2007 was approximately $450 million in amortised cost, including about $50 million of AAA-rated asset-backed CDOs that were downgraded to below investment grade. The company stated it expected the declines in fair value to result in further securities writedowns in the fourth quarter.
More on Structured Products
Investors’ capital at risk if underlying is below barrier level at maturity
Veteran equity derivatives banker founds London-based firm Alpima
Separating market risk from credit risk in ratings methodologies makes little sense
Lookback feature aims to mitigate sudden falls in first few months of the term
Sign up for Risk.net email alerts
Sponsored video: MarketAxess
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.