Nov. 18 (Bloomberg) -- E*Trade Financial Corp. shares surged the most since August after TD Ameritrade Holding Corp.’s chief executive officer told Reuters he would consider buying the rival online brokerage at the right price.

E*Trade rose 9 percent to $1.69 at 4 p.m. in New York. “We’d be interested but it has to be on the right terms with the right structure,” Fred Tomczyk said, according to Reuters. “We have a very clean balance sheet, so we don’t want to buy a bunch of problems,” he added, the news service reported.

TD Ameritrade boosted net income five straight years before 2009. Earnings dropped in the fiscal year that ended in September at the Omaha, Nebraska-based company following the worst financial crisis since the 1930s. E*Trade, the fourth- largest online brokerage, has lost money for two years because of losses from bad home loans. The company has almost resolved that crisis, Chief Executive Officer Donald Layton told Bloomberg News yesterday.

“It would definitely make sense if you can work out the loan issues at E*Trade,” said Richard Repetto, an analyst at Sandler O’Neill & Partners LP in New York. TD Ameritrade has “kept a bunch of cash on hand.”

TD Ameritrade had $6.68 billion in cash and short-term investments at the end of September, according to data compiled by Bloomberg. That was an almost fivefold increase from a year earlier, the data show.

Share Sale, Swap

New York-based E*Trade has rallied 47 percent in 2009 after Layton, who will resign at the end of the year, sold shares and swapped interest-bearing debt into zero-coupon convertible bonds to improve the company’s finances. E*Trade shares fell 95 percent in 2007 and 2008 following subprime-mortgage losses.

E*Trade “does not comment on marketplace speculation or rumor,” Pam Erickson, a company spokeswoman, wrote in an e- mailed statement.

TD Ameritrade’s best use of cash is to purchase another company, Tomczyk said, according to Reuters.

“We’re always looking at opportunities in the marketplace,” said Kim Hillyer, a spokeswoman for TD Ameritrade. “It’s something that’s always been a part of our growth strategy.”

To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.

Last Updated: November 18, 2009 16:20 EST