The discount brokerage industry needed some good news heading into last night's E*TRADE (NASDAQ:ETFC) fourth-quarter report.

Charles Schwab (NASDAQ:SCHW) and TD*AMERITRADE (NASDAQ:AMTD) missed Wall Street's targets a week ago, when they posted year-over-year declines in profitability.

The gloomy tidings vindicated Goldman Sachs' call to lower its price target on the three brokers, as well as optionsXpress Holdings (NASDAQ:OXPS) and TradeStation (NASDAQ:TRAD), last month.

Would E*TRADE buckle under pressure, too?

Well, it wasn't a great report, but E*TRADE managed to at least match Wall Street's bottom-line expectations, posting a substantially smaller deficit than it did a year ago. The discounter's $0.04-per-share quarterly loss is a sliver of the $0.50 a share it surrendered a year earlier. Even if cynics point out that E*TRADE's fully diluted share count has more than tripled over the past year as the broker beefs up its balance sheet, it still posted a marked improvement on the bottom line.

There were also setbacks. Daily average revenue trades fell by 20%, but that's off the frenetic trading pace set during the final quarter of 2008, when everyone was dumping their shares in frenzied capitulation. After drawing net new brokerage accounts through the first three quarters of the year, E*TRADE finally closed out more accounts than it opened during the fourth quarter.

These two negative developments will be something to watch for in the near term, but that won't make E*TRADE any less attractive a buyout candidate for TD*AMERITRADE, Schwab, or any other potential suitor looking for some skin in the discount brokerage game. Yes, E*TRADE could be doing better, but its larger rivals could also use a little non-organic boost to grow during the market lull.

It has been argued that buyers may wait until E*TRADE has completely exorcised its bad-loan demons, but that could be a costly mistake. The broker has made serious headway in cleaning up its subprime exposure, and some analysts see a return to profitability this year. These events would naturally drive E*TRADE's asking price higher.

Can an industry hungry for good news wait much longer before the final act of consolidation is complete? I don't think so.

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