Sept. 9 (Bloomberg) -- E*Trade Financial Corp., the online brokerage that’s been unprofitable for two years, said Chairman and Chief Executive Officer Donald Layton will step down at the end of the year after reducing the company’s debt burden. Layton, 59, became CEO in March 2008 after joining E*Trade’s board in November of the previous year, when the company ousted Mitchell Caplan and received a $2.55 billion cash infusion from Citadel Investment Group LLC, now its largest shareholder. Layton’s contract was set to expire at the end of this year, the New York-based company said today in a statement. Layton oversaw E*Trade’s recovery from the collapse of the subprime mortgage market. Cash from Citadel helped the brokerage weather defaults, and Layton orchestrated a $1.7 billion exchange of debt into zero-coupon convertible bonds to reduce interest costs. E*Trade shares have almost tripled since a record low of 59 cents in March, and last quarter, it posted a smaller loss than analysts estimated because it set aside less money for future defaults. “Now that our major recapitalization is complete and the online brokerage business is growing again, I have accomplished what was needed for me to end my time as CEO on schedule,” Layton said in the statement. Interest expenses fell 48 percent to $145.9 million last quarter after E*Trade cut debt by giving equity to bondholders. E*Trade shares advanced 0.6 percent to $1.66 at 9:51 a.m. New York time. Since the end of last year, they’ve climbed 44 percent, compared to a 46 percent rally in the NYSE Arca Securities Broker/Dealer Index that tracks E*Trade and 10 rivals. Layton received about $11.8 million in compensation last year, including options and restricted stock that vest through 2009, according to a 2008 regulatory filing. He didn’t receive any bonuses in cash, the filing said.

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