E*Trade Financial Corp. replaced its chief executive officer, Steven Freiberg, and named chairman Frank Petrilli as interim CEO, sending the online brokerage’s shares up 6 per cent as takeover speculation resurfaced.
E*Trade said on Thursday its board has formed a committee to find a permanent replacement for Mr. Freiberg, who joined the firm in April, 2010.
The New York-based brokerage has long been seen as a likely takeover target, and hedge fund Citadel, its largest shareholder, last year persuaded E*Trade to hire investment bank advisers to explore its options. But for the second time in two years, E*Trade’s board rejected the idea of selling to a bank or rival brokerage.
Shares of E*Trade were up 6 per cent at $8.50 (U.S.) in midday trading on Nasdaq.
“One of the things that is probably driving that is the idea that Steve never seemed on board with Citadel’s suggestion that the company explore a sale,” said Ed Ditmire, an analyst at Macquarie Group.
Under Mr. Freiberg, a former Citigroup veteran, E*Trade made progress in chipping away at its banking unit’s outsized portfolio of soured mortgage loans, which nearly sank the firm when the housing market collapsed in 2007.
Citadel stepped in at the time with $2.5-billion in rescue financing to keep the firm afloat. Since then Citadel has been critical of E*Trade’s lack of profitability.
Last month E*Trade reported a decline in profits for the latest quarter due largely to a lull in trading among retail clients. In response, the firm initiated a cost-cutting program.
“E*Trade’s board may have run out of patience as the company has materially underperformed peers and financial stocks over the last two years,” David Chiaverini, an analyst at BMO Capital Markets, said in a note to clients.
Mr. Petrilli, 61, is a former CEO of TD Waterhouse, which is now a part of TD Ameritrade, one of the rival brokerages often mentioned as a likely acquirer of E*Trade, along with Charles Schwab Corp.
An E*Trade-TD Ameritrade tie-up would make sense as it would lead to significant cost synergies, David Trone, an analyst at JMP Securities, said in a note to clients. JMP has estimated such a deal would be about 30 per cent accretive to TD Ameritrade.
TD Ameritrade declined to comment. Shares of the company were up 2.2 per cent at $16.77 on the New York Stock Exchange.
E*Trade did not give a reason for Mr. Freiberg’s departure.
“The abrupt departure of Mr. Freiberg could suggest that the board could be warming up to the idea of a sale,” Mr. Trone said.