Online broker E*Trade Financial Corp posted its 10th-straight quarterly loss, but it was a quarter of the size of the loss in the year-earlier quarter as the company made headway on bad loans.

With its exposure to mortgage-market losses declining, E*Trade said it was now positioned for sustainable, profitable growth. E*Trade has been careful not to forecast when it will return to profitability.

E*Trade shares rose 3 percent in after-hours trading following the results, which matched market expectations.

The company, increasingly seen as a takeover target, reported a loss of $67.1 million, or 4 cents per share, in the fourth quarter ended December 31, down from a loss of $275.6 million, or 50 cents per share, a year earlier.

Quarterly revenue rose 7.6 percent to $523.4 million.

E*Trade is still suffering from a foray into the real estate market in the 1990s and its banking unit has run up big mortgage-related losses, overwhelming a healthy trading business.

The company's shares have fallen more than 90 percent since 2007 and slipped below $1.00 early last year, when the possibility of bankruptcy loomed.

Under regulatory pressure, E*Trade has aggressively raised capital with the backing of major stakeholder Citadel Investment Group, and is starting to recover.

The company's shares were up 15 cents at $1.70 in after-hours trading. The stock rose 1.85 percent in regular trading ahead of the results announcement.

Special mention delinquencies in E*Trade's home equity portfolio -- the company's greatest exposure to loan losses -- reversed course to fall 9 percent from the preceding quarter.

The company provisioned $292 million for loan losses and logged $324 million in charge-offs, both lower than in the preceding quarter.

Daily average trading volumes fell 20 percent from last year, hurt by an earlier-than-usual holiday period trading slowdown as individual investors locked in profits from last year's sharp stock market rise.

Last month, E*Trade named Robert Druskin, a director, as interim chief executive and said it had made meaningful progress in the search to replace Donald Layton, who stepped down as CEO at the end of 2009..

There was no mention of the CEO search in Wednesday's statement.

Larger rivals TD Ameritrade Holding Corp and Charles Schwab Corp last week reported steep quarterly profit drops that missed Wall Street expectations.

(Reporting by Jonathan Spicer; Editing by Ted Kerr)