E TRADE Financial Corporation : UPDATE :ETrade Names Petrilli New Chairman;CEO Freiberg To Stay On Board

--E*Trade new chairman Frank Petrilli has ties to TD Bank

--Chief Executive Steven Freiberg will remain on the board

--Chairman's relationship with TD Bank CEO can only benefit E*Trade, analyst says

(Updates with background on Petrilli in the first through third paragraphs, comment from analyst in the fourth paragraph, and background on E*Trade exploring a sale in the eighth paragraph.)

 
   By Brett Philbin 
   Of  
 

E*Trade Financial Corp. (ETFC) named Frank Petrilli, a former chief executive of TD Waterhouse, its new chairman, replacing Chief Executive Steven Freiberg, who held the role on an interim basis since last spring.

Petrilli, 61, was most recently CEO of Surge Trading Inc. and previously served as chief executive of Nexxar Group Inc. However, his appointment raised some eyebrows due to his prior ties to Toronto-Dominion Bank (TD.T, TD), a 45% owner of TD Ameritrade Holding Corp. (AMTD), a rival online brokerage that often is cited by analysts and investors as a potential acquirer of E*Trade.

Petrilli held several positions at TD Waterhouse, formerly a U.S. unit of TD Bank Group, from 1995 to 2004 and reported to the Canadian bank's current head, Ed Clark.

In a note to clients, Sandler O' Neill + Partners analyst Richard Repetto wrote: "We suspect Mr. Petrilli's relationship with Mr. Clark is strong and can only benefit E*Trade over the longer term as it looks to potentially unlock the embedded value of the franchise with, in our view, its #1 acquisition/merger candidate, TD Ameritrade."

An E*Trade spokeswoman didn't immediately respond to a request for comment.

Petrilli fills the chairman role that was held by Freiberg since May after Robert Druskin, a former Citigroup Inc. (C) executive, left E*Trade to become chairman of the Depository Trust & Clearing Corp. Freiberg will remain on the board as it expands to 11 from 10 directors.

In a statement, Freiberg said: "A seasoned veteran and well-recognized leader in our industry, Frank's experience makes him an ideal addition to our board.... In addition to his in-depth understanding of both securities brokerage and consumer banking businesses, Frank has a proven record of leading successful growth in the retail investing segment."

Last year, E*Trade was pushed by its largest shareholder, hedge fund giant Citadel LLC, to explore a potential sale of the company. But fears about financial institutions' exposure to troubled European debt, high market volatility and concerns about E*Trade's mortgage portfolio limited the prospects of a transaction. The chief executives of Charles Schwab Corp. (SCHW) and TD Ameritrade, E*Trade's main rivals, also dismissed talk of a potential deal, citing risky assets in the portfolio. In November, E*Trade ultimately said it wouldn't pursue a potential sale of the company and will instead focus on executing its business plan.

E*Trade last week posted an unexpected fourth-quarter loss as the company boosted a portion of its loan loss allowance by $67 million and recorded write-downs of $15 million related to certain loans in the process of foreclosure. Shares of E*Trade closed up 1% at $8.27.

-By Brett Philbin, Dow Jones Newswires; 212-416-2173; brett.philbin@dowjones.com

--Ben Fox Rubin contributed to this article.