Moody's Lifts E*Trade Rating A Notch, Citing Loan PortfolioFont size: A | A | A10:37 AM ET 3/3/11 | Dow Jones DOW JONES NEWSWIRES
Moody's Investors Service upgraded E*Trade Financial Corp.'s (ETFC) junk-level credit rating a notch, citing improving stability in its loan portfolio, stronger regulatory capital ratios and better financial flexibility at the company level.
Shares of the company were up 2.3% to $15.93 recently.
With a B2 rating, the online brokerage is five steps below investment-grade territory.
The ratings agency said declining delinquencies in E*Trade's mortgage portfolio in each of the past four quarters has contributed to the company's flexibility despite the portfolio's "generally poor underwriting quality."
Moody's also said a conservative estimate of the company's operating performance suggests its bank would maintain its capacity to hand up dividends to the parent company, allowing it to service its $2.3 billion of debt, including $1.6 billion in interest-bearing debt. The company's ability to extract dividends from the bank will remain subject to regulatory approval, Moody's added.
Moody's last acted on E*trade on July 27, when it changed the company's outlook to stable from negative.
The company in January posted a narrower fourth-quarter loss on declining delinquencies across its bank's loan portfolio, but its loan-loss provision climbed 28% from the third quarter, reflecting a cautious outlook by the company on its mortgages.
-By Drew FitzGerald, Dow Jones Newswires; 212-416-2909;