U.S. discount brokerage E+Trade Financial posted a larger-than-expected quarterly loss after a $2.2 billion charge related to the sale of its asset-backed securities portfolio.
The company also announced details of a widely anticipated "turnaround plan" that acting Chief Executive Jarrett Lilien said is expected to return the company to profitability in 2008. The plan includes disposing of non-core assets and cost-cutting and possibly raising money in capital markets later in the year.
Shares rose 16% in after-hours trading.
The company reported a fourth-quarter loss of $1.7 billion, or a loss of $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 expected E+Trade to post a quarterly loss of $3.14 per share, on negative revenue of $1.8 billion.
During the quarter, the company took a $2.2 billion charge related to the ABS sale, increased its provision for losses on home equity loans to about $500 million, and recorded a $100
million impairment to goodwill.
E+Trade, which was 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, 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 ABS sale, and to increase loan-loss provisions.
The company said it expects an additional $400 million to $600 million in loan loss provision expense in 2008.
Lilien said the company's turnaround plan will include the sale or closure of non-core assets, trimming costs by $360 million during the year, and potential capital markets transactions later in the year.
"Down the road there are things we can do as the turnaround shows results -- this would more than likely be in the second half of the year and would require that things have improved,"
Lilien said the measures were being taken to strengthen the company's capital position, but that its main brokerage business was strong.
Net revenue in its retail segment rose 10 percent to $476 million, the highest level ever recorded by the company.