Updated to clarify trends in provision for loan losses and certain other numbers. Adds conference call coverage, analyst comment, latest share price.

NEW YORK (

TheStreet

) --

E*Trade Financial

(ETFC) - Get Report

is one step closer to finding a permanent CEO and says it has a "preferred candidate" in mind.

E*Trade's Chairman and interim CEO Robert Druskin said on an earnings conference call late Wednesday that E*Trade is making "meaningful" progress toward hiring a permanent CEO.

E*Trade apparently has a "preferred candidate in our sites," Druskin said in answer to a question by JMP Securities Michael Hecht. "

Our intention is to have an announcement in the near future."

Druskin added that ideally the new chief executive would stay for more than two years, he or she will have a strong background in financial services, and be "very comfortable" with technology and understands retail financial services.

"I would tell you that we have seen enormously attractive candidates," Druskin said.

E*Trade reported its fourth-quarter results after Wednesday's closing bell. The company posted a fourth-quarter loss to $67 million, or 4 cents a share, in line with Wall Street's consensus view, and showed improvement in the credit quality of its loan portfolio.

The bottomline figure was much narrower than E*Trade's loss of $274 million, or 50 cents a share, in last year's fourth quarter. Net revenue came in at $523.4 million for the three months ended Dec. 31, up 7.6% from the year-earlier quarter. A large decrease in operating interest expenses fueled the revenue jump, but was offset by a decline in trading commissions as the equity market volatility experienced through much of the financial crisis slowed during the quarter.

E*Trade's provision for loans losses for the latest quarter was $292 million, down 15% from the third quarter and more than 40% from the fourth quarter of 2008.

Last year "was a watershed year for E*Trade, as the company positioned itself to achieve sustainable, profitable growth by successfully recapitalizing the balance sheet and maintaining its focus on the online brokerage business," Druskin said in a statement. "The online brokerage business performed extremely well, recording its highest level of DARTs for any year and delivering strong organic growth in brokerage accounts, cash, and margin receivables."

Matt Snowling, an analyst at FBR Capital Markets, reiterated his outperform rating on E*Trade and raised his 12-month stock price target to $2.25 on Thursday following the report.

"Although the rate of improvement in credit and capital position has slowed, we believe that each quarter that passes is evidence that the worst is behind E*Trade and the company can now focus its time and resources on growing and diversifying the core brokerage business," despite potentially delaying the broker's return to profitability, Snowling writes in a research note. "

We continue to believe that ETFC offers significant upside potential for patient investors."

Snowling now believes that E*Trade will post breakeven results in the fourth quarter of fiscal 2010 as opposed his previous expectation that it would do this in the third quarter. He also lowered his 2010 estimate for the company by 3 cents to a loss of 7 cents a share.

"We expect ETFC to manage a stable if not slightly improved net interest spread over the course of the year due to continued reductions in higher cost deposits, higher margin balances, and flexibility with regard to more actively managing the excess cash at the bank," Snowling adds.

Following a $1.74 billion debt-to-equity conversion last year, E*Trade's Tier-1 capital ratio to total adjusted assets was 6.69% at Dec. 31. Tier-1 capital to risk-rated assets was 12.8%. Total risk-based capital was 14.08% at Dec. 31.

That said, the company saw an earlier than usual seasonal decline in trading activity in the latest quarter, with volume in high-volatility stocks taking a hit. Retail investors also seemed to be taking profits earlier than usual after the market run up since March.

E*Trade's total daily average revenue trades or DARTs, came in at 174,000 for the fourth quarter, down 12% sequentially and 20% compared to the year-ago equivalent period. Trading commissions, including fees and service charges, among other things, fell 11% to $205 million as a result.

Credit quality improved during the quarter as E*Trade works to wind down its troubled loan portfolio, especially its home equity loans. E*Trade said that total so-called special mention loan delinquencies, or those 30 to 89 days late in payments fell by 3% from the third quarter, while total so-called at-risk delinquencies fell 2%.

E*Trade's two main rivals, TD Ameritrade and Charles Schwab, missed Wall Street estimates when they reported respective earnings results last week.

E*Trade's stock closed up marginally on Wednesday with volume coming in at a little more than 46 million, in line with the issue's trailing three-month daily average. Shares had traded higher in after-hours action but were down 1.8% to $1.62 in morning trades on Thursday.

--Written by Laurie Kulikowski in New York.