UPDATE 1-E*Trade posts wider-than-expected 4th-quarter loss

Thu Jan 24, 2013 5:47pm EST

(Adds CEO comment, financial details, after-hours stock price)

By Jed Horowitz

NEW YORK Jan 24 (Reuters) - E*Trade Financial Corp , which last week named a new chief executive to help shed bad loans and return it to its online brokerage roots, reported a fourth-quarter 2012 loss on a higher-than-expected cost in refinancing its debt.

The New York-based company reported a loss of $186 million, or 65 cents a share, for the fourth quarter. Its shares fell more than 4 percent in after-hours trading.

E*Trade was expected to lose 54 cents a share, according to the consensus estimate of 16 analysts surveyed by Thomson Reuters I/B/E/S.

In the 2012 third quarter, E*Trade had a loss of $29 million, or 10 cents a share. Investors are closely monitoring E*Trade's quarter-to-quarter results to evaluate progress in shedding credit problems and building brokerage revenue.

The company, which has lost hundreds of millions of dollars on its bank unit's bad mortgage loans since late 2007, had a loss of $6 million, or 2 cents a share, in the fourth quarter of 2011. In all of 2012, it lost $112.6 million, compared with a gain of $156.7 million in 2011.

E*Trade had forecast that its retirement of $1.3 billion of high-rate debt in the fourth quarter would create a loss. The debt retirement cost it $257 million pretax, or about 59 cents a share, the company said Thursday.

Revenue in the fourth quarter fell to $468 million, down 4.5 percent from the third quarter and down 1 percent from the year-earlier quarter.

The company said it made progress in shedding bad assets in order to strengthen its capital position. Its balance sheet contracted by $3 billion in the quarter, money set aside to cover future bad loans plummeted by 47 percent from the third quarter to $74.4 million and its modification of mortgage loans fell to its lowest level in several quarters and is expected to continue trending down, E*Trade Chief Financial Officer Matthew Audette said on the conference call.

E*Trade last week appointed Paul Idzik, a former banker at Barclays Plc and consultant at Booz Allen Hamilton, as its fifth chief executive since 2009.

"It's a great business model bouncing along in an unfavorable investment environment," Idzik said on a conference call with investors after the market closed on Thursday.

Without referencing its past problems, he said that the brokerage business is well-positioned for growth when the economy revives and investor confidence returns. "We're well-positioned but we're not there yet. Retail investor confidence is low and so are volumes."

E*Trade said trading by clients that produced revenue in the fourth quarter of 2012 fell 1 percent from the prior quarter and 9 percent from the fourth quarter of 2011. Daily average client trades fell 12 percent in the year, the company said, although trades are up in January from December.

Clients added $2.3 billion of net new brokerage assets in the quarter, and the company said it improved retention of clients. Rival brokerage firms also have reported extremely strong inflows of assets in late 2012 as many clients cashed out investments in anticipation of higher U.S. tax rates in 2013.

TD Ameritrade Holding Corp gathered a record $15.6 billion in new client assets in the last three months of the year, up from about $10 billion in the year-earlier quarter.

Charles Schwab Corp brought in $44 billon of net new assets in its last quarter, including $22.6 billion of net inflows in December alone.

Shares of E*Trade, which have ranged between $7.08 and $11.50 over the past year, on Thursday closed 0.3 percent lower at $10.27. They fell about 4.5 percent in after-market trading on Thursday to $9.81. (Editing by Leslie Adler and Matthew Lewis)

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