E*Trade shares plummet on Citigroup downgrade

The company's stock fell 58.7 percent, or $5.04, to close at $3.55. Citigroup analyst Prashant Bhatia said this morning in a note to clients that the brokerage had changed its earnings forecasts five times in eight months, "reflecting poor risk management."

E*Trade said later in a message to clients on its web site that the company could afford to "absorb an immediate write-down in excess of $1 billion and still remain well capitalized."

Last Friday, E*Trade reported in a securities filing that the value of its mortgage-backed securities holdings had fallen significantly and could lead to bigger than expected write-downs in its fourth fiscal quarter.

Citigroup analyst Prashant Bhatia said that the company could lose market savvy customers with more than the federally protected $100,000 in assets to rivals such as Charles Schwab and TD Ameritrade.