E-Trade's Stock Rallies After Balance Sheet Restructuring

Trade Financial Corp.'s stock surged 3.6% in premarket trade Tuesday, after the online brokerage said it would restructure its bank balance sheet to eliminate high-cost legacy funding obligations. As part of its plan, E-Trade will eliminate $4.4 billion of wholesale funding obligations by the end of the quarter. The company said it would record a $410 million charge in the current quarter as a result of the restructuring. E-Trade said it will offset the charge by decreasing the size of its balance sheet, utilizing excess capital and with a contribution of $110 million from the parent to the bank. E-Trade said because it expects a loss in the current quarter, it does not intend to issue a dividend from the bank to the parent company during the fourth quarter. "As the company continues to deploy excess capital, this action provides us with very clear and immediate benefits in the form of accelerating the path to normalized earnings and creating opportunities for balance sheet growth funded by core customer deposits," said Chief Executive Paul Idzik. The stock has dropped 17% over the last three months, while the S&P 500 has lost 7.6%.