E*Trade taps former TD Waterhouse head as chairman

(Reuters) - Online brokerage and financial services company E*Trade Financial (ETFC.O) said on Monday it appointed Frank Petrilli, a former chief executive of TD Waterhouse, as chairman of its board of directors.

Petrilli, 61, took over the role on Friday from Steven Freiberg, E*Trade's chief executive, who had been chairman on an interim basis since May.

In the long run, the appointment could be a shrewd one, due to Petrilli's strong relationship with TD Bank Financial Group, said Rich Repetto, an analyst at Sandler O'Neill, in a note to clients.

TD Bank, Canada's No. 2 lender, holds a 45 percent stake in TD Ameritrade, which has often been tipped as a potential merger and acquisition partner for E*Trade.

Petrilli held several positions at TD Waterhouse between 1995 and 2004, which was at the time a U.S. subsidiary of TD Bank. He reported to Ed Clark, TD Bank's chairman and chief executive.

"We suspect Mr. Petrilli's relationship with Mr. Clark is strong and can only benefit (E*Trade) over the longer term as it looks to potentially unlock the embedded value of the franchise with, in our view, its No. 1 acquisition/merger candidate, TD Ameritrade," Repetto said.

Petrilli, a veteran of the banking and electronic brokerage industry, almost left TD Waterhouse back in 1999 to become president of E*Trade Securities.

E*Trade, a darling among investors during the Internet boom, announced in July of 1999 that Petrilli was coming on board. But nine days later, Petrilli said he was returning to TD Waterhouse for personal and family reasons.

"A confluence of things on a personal level and a family level caused me to rethink my decision before officially starting at E*Trade," he told Reuters at the time. "This has nothing to do with the E*Trade organization or the people at all."

Petrilli was not immediately available for an interview on Monday.

MORTGAGE LOANS STILL HAUNT E*TRADE

Last week, E*Trade reported a surprise loss in its quarterly earnings as it set aside higher-than-expected provisions for loan losses, sending the company's shares down 15 percent.

E*Trade has taken billions in losses due to its outsized exposure to sub-par mortgages in its banking unit. The losses led to a near collapse of the company in 2007, prompting hedge fund Citadel to infuse $2.5 billion into it to keep it afloat.

The company has made progress with its debt and credit issues, chalking up its first full-year profit since 2006, but the loan book continues to drag on earnings.

As a result, E*Trade's lagging share price has made it the subject of takeover speculation for years, with TD Ameritrade and Charles Schwab Corp (SCHW.N) tipped as potential acquirers.

In November, following a strategic review initiated at the insistence of Citadel, E*Trade's board slammed the door shut on the idea a sale of the company in the near term. It said the company's business plan was the best alternative for increasing stockholder value.

E*Trade executives later said a big part of the decision not to put the company on the block was the rocky economic recovery, which eroded the value of a potential deal. TD Ameritrade, TD Bank, and Schwab, separately expressed little appetite for a deal given uncertainty around the mortgage portfolio.

TD Bank purchased Chrysler Financial last year for $6.3 billion. It bought troubled U.S. lender South Financial in 2010, and it continues to expand its bank branch network in the United States, which is now one of the country's biggest.

Petrilli's most recent job was as chief executive of Surge Trading, which executed stock trades for brokerage firms that service small investors.

The company started in 2009 when it bought the former trading operations of convicted swindler Bernie Madoff. It shut down in October of last year because of insufficient capital.

(Reporting By John McCrank; Editing by Walden Siew, Dave Zimmerman)