NEW YORK (Reuters) - Beleaguered discount brokerage E*Trade Financial Corp (ETFC.O) posted a larger-than-expected quarterly loss on Thursday but said it expected to return to profitability in 2008, sending its shares higher.
The company announced details of a widely anticipated "turnaround plan" and acting Chief Executive Jarrett Lilien said he was confident of achieving profitability this year despite some dark clouds on the U.S. economic horizon.
"We have factored in a pretty dim economic year ahead but we think customers will remain active, and that is what we have baked into (our) plan," he said in an interview.
Shares of E*Trade rose 9 percent to $3.80 in extended trading from their $3.48 close in the regular Nasdaq session. The stock has fallen about 85 percent in the past 12 months, prompting a number of shareholder lawsuits.
The turnaround plan includes disposing of non-core assets and cost-cutting and possibly raising money in capital markets later in the year.
After a $2.2 billion charge related to the sale of its asset-backed securities portfolio, the company reported a fourth-quarter loss of $1.7 billion, or $3.98 per share, compared with net income of $177 million, or 40 cents per share a year ago.
Reported revenue was negative $2 billion.
Analysts on average expected E*Trade to post a quarterly loss of $3.14 per share, on negative revenue of $1.8 billion, according to Reuters Estimates.
During the quarter, the company also increased its provision for losses on home equity loans to about $500 million, and recorded a $100 million impairment to goodwill.
DEAL OR NO DEAL?
E*Trade rivals Charles Schwab (SCHW.O) and TD Ameritrade (AMTD.O) both said last week that they were interested in acquiring rival brokerage operations. But Lilien declined to say whether the company has been approached by any bidders.
"We don't need to do a deal, we have a great growth franchise, but if a good one comes along we will have to consider it," he said.
E*Trade, badly hit last year by losses in its mortgage business, received a $2.55 billion cash infusion from Chicago-based hedge fund Citadel Investment Group in late November, including the sale of its $3 billion ABS portfolio for about $800 million.
At that time, the company said it expected to take a fourth-quarter charge on its asset-backed portfolio sale, and to increase loan-loss provisions.