E*Trade Financial (NYSE:ETFC) is set to make several changes as a part of its broad restructuring plan. The brokerage announced that it will close its institutional trading business and sell its $3 billion asset-backed security portfolio. E*Trade also appointed a former Wachovia official and mortgage industry veteran Robert Burton as chief operating officer of its banking segment. Shareholders are hoping that these and other changes will help change the fortunes in the troubled brokerage.

E*Trade’s restructuring plan is focused on further reducing balance sheet risk and leverage in order to weather the storm and stay alive. These efforts included a sale of some $3 billion in securities, including a combination of mortgage-backed securities and muni bonds. The sales resulted in a realized loss of less than $5 million and should be settled by February. Meanwhile, the brokerage also announced that it would reduce its wholesale borrowing levels by cutting about $3.5 billion in Federal Home Loan Bank advances and repurchase agreements in this quarter.

E*Trade also announced that it saw “turnaround momentum” in its customer behavior as it added around 87,000 gross new accounts in December, ending the year with $190 billion and $33 billion in cash. The brokerage unit is also forming a special committee in order to explore ways to reduce the risk of its real estate portfolio after recently selling of a $3 billion portfolio of securities for $800 million. The company plans to provide additional details on its restructuring plan on January 24th.

In the end, this is all good news for ETFC shareholders who have been experiencing a tough time recently. These efforts should result in a significant reduction in risk along with more customer accounts and revenues. If successful, these measures could prove to be enough to help E*Trade recover to its previous price levels. Combined, these factors make ETFC a stock worth watching!

Related Companies
TD Ameritrade (AMTD)
TradeStation Inc. (TRAD)
NetBank Inc. (NTBKQ)