E-Trade Group Inc.'s decision to replace its chairman and chief executive officer, Christos M. Cotsakos, with Mitchell H. Caplan is yet another sign that the online brokerage is placing a heavier emphasis on its retail banking operation.
Mr. Caplan is a former lawyer who founded one of the earliest direct banks, and who sold it in early 2000 to E-Trade for $1.1 billion in stock. The former Telebanc Financial Corp. was rebranded as E-Trade Bank, with Mr. Caplan still at the helm.
His initial titles at E-Trade were chief financial products officer and managing director for North America, and he became president and chief operating officer nine months ago.
Mr. Caplan's promotion, announced Friday, was met positively by analysts. "They need someone with more operational experience across financial services," said Daniel Burke, a vice president of research at Gomez Inc. of Waltham, Mass.
Todd Halky, an analyst with National Bank of Canada's Putnam Lovell Securities Inc., said, "As the company further diversifies, this is a positive move for both the company and the shareholders." Mr. "Caplan is well-positioned, experienced, up to the task of running this operation."
Mr. Cotsakos was said to have been ousted on Thursday, a day after E-Trade reported fourth-quarter profits of $52 million, up almost 52% from the same quarter in 2001. But analysts were discouraged that E-Trade said it anticipated an earnings drop of as much as 30% this quarter from the last.
E-Trade on Friday issued a statement saying Mr. Cotsakos had resigned, and declined to comment on a report in the New York Post that E-Trade's board had fired the 54-year-old Mr. Cotsakos from the position he had held since 1996. Analysts said Mr. Cotsakos' departure came as little surprise, given E-Trade's efforts at diversification, which in the fourth quarter produced substantial revenue gains from its banking and mortgage units.
In addition, shareholders and investors were less than pleased with the roughly $80 million in annual compensation paid to Mr. Cotsakos, who in May signed a new, two-year contract that had him agreeing to remove any formal severance package.
Raj Dhinsa, an analyst with Jupiter Research, said that discount brokerage in general fell out of favor during the bear market, and E-Trade was "the poster child of this area, which has really been hard-hit."
