E-Trade posts loss but sees profitable '08

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 may include capital-raising 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," he said. Lilien said the company was budgeting for a slow down but not a recession.

Lilien, who stepped in as acting CEO when former chief Mitch Caplan stepped down in late November, said the company's main brokerage business was strong.

Net revenue in its retail segment rose 10 percent to $476 million in the fourth quarter, the highest level ever recorded by the company.

The company recorded its greatest customer activity in at least 5 years on Tuesday, when U.S. markets took a nose dive before recovering from their worst levels.

While volatile markets historically have scared away brokerage customers, Lilien said this time around the company has seen a steadier pattern emerge.

"The investor is staying engaged, and we find that that has changed with retail investors getting more sophisticated," he said, adding that options trading -- which investors can use to hedge risks -- accounts for about 17 percent of trading activity.

The company ended 2007 with about 4.7 million customer accounts.

Lilien said some 70,000 customers spooked by the financial upheaval E*Trade did close their accounts, but the rate of defections slowed markedly after Citadel's cash infusion.

The U.S. Securities and Exchange Commission also in November disclosed an investigation into the company's mortgage business.

Lilien said the company had not set aside any funds in the quarter for legal liabilities as insurance is expected to cover costs, if any. There has been no further development in the SEC's review, he added.

(Editing by Tim Dobbyn)