E-Trade names former Citigroup exec as new CEO
NEW YORK -- E-Trade Financial Corp. said Monday that it has tapped former Citigroup Inc. executive Steven Freiberg to be its new CEO, starting next month.
The brokerage firm also plans to ask shareholders to support a reverse stock split, which will lower its total share amount to 400 million.
Freiberg is stepping in to run a company that has been working to restructure itself for more than a year. It was hammered by losses on risky mortgage investments during the credit crisis and recession.
E-Trade continued to lose money in the fourth quarter because it had to set aside money to cover bad mortgage investments. However, its losses are narrowing. E-Trade lost $67.1 million during the last three months of 2009, compared with a $275.6 million loss during the same quarter in 2008.
New York-based E-Trade has been ridding itself of the soured investments, raising capital and refocusing its brand on its core online equity trading platform.
At the same time, it has been speculated the company could be a takeover target by competitors. Some analysts have pointed to competitors such as TD Ameritrade Holding Corp. or Charles Schwab Corp. as possible suitors.
Freiberg will replace Robert Druskin on April 1. Druskin, who is also a former Citigroup executive, has served as E-Trade's interim CEO since Don Layton retired at the end of 2009. Druskin will remain on the board of directors, serving as chairman. Freiberg will also join the board.
Freiberg, 53, has plenty of experience working with consumer products in the financial industry. He was most recently head of Citigroup's global consumer group, which includes retail and commercial banking as well as mortgage and credit card lending.
"I think it is a good choice, given his background and experience in consumer finance," said Joel Jeffrey, an analyst at Keefe, Bruyette & Woods Inc. Freiberg should be able to help the company continue to unwind its consumer loan portfolios, Jeffrey noted.
One of the first big moves that will be made under Freiberg is a reverse stock split that will give investors one share of stock for every 10 they currently own.
Jeffrey said the reverse split is a good move by E-Trade because it could open up the stock to new investors who either choose not to or are restricted from trading shares of companies with such low prices.
It also significantly cuts the number of outstanding shares, so incremental changes in profitability are more pronounced when the company reports quarterly results, Jeffrey said.
The reverse split must be approved by shareholders at the company's annual meeting on May 13.
E-Trade share have been stuck below $2 since late 2008, except for a short period in early 2009 when they reached $2.58. Shares rose 1 cent to $1.59 in trading.
At the current trading price, shares would be revalued at $15.90 following the reverse split.