U.S. online brokerage E*Trade Financialon Monday warned that it expected full-year earnings per share to be sharply below its previous forecasts as it increases provisions for bad loans, and writes down the value of some mortgage linked securities.
The brokerage's shares fell more than 8% in extended traded after the news.
E*Trade, which plans to exit the wholesale mortgage business, said it expected charges of about $32 million for that and other restructuring moves, most of which will fall in the fourth quarter.
It will streamline its direct mortgage lending business to focus on its retail operations.
E*Trade President and Chief Operating Officer Jarrett Lilien said E*Trade's future balance sheet growth would come from retail assets.
"The market been a catalyst for us to accelerate those plans," Lilien said in an interview. "It's our way of taking a bad credit market and turning it into something positive."
E*Trade said it expects charge-offs of $95 million for loan losses and increased provision expense of $245 million in the second half of 2007.
E*Trade lowered its full-year earnings outlook from a range of $1.53 to $1.67 per share to $1.05 to $1.15 per share.
The company said the revised outlook assumes a securities impairment of up to $100 million in the second half of 2007.