NEW YORK (
The Charles Schwab Corp.
(SCHW - Get Report)
was cut to "Neutral" from "Buy" by Goldman Sachs in a report published Wednesday that was bearish on the discount brokerage sector as a whole.
In downgrading Schwab, Goldman analysts cited a decline in yields on residential mortgage backed securities (RMBS) issued by
announcement last week that it would buy long-dated RMBS in an effort to boost the housing market.
So called "agency" RMBS make up 70% of Schwab's securities portfolio, according to Goldman, and the decline in yields may encourage pre-payments and "headwinds" in net interest margins. Net interest margins refers to the difference between a company's cost of capital and the rate it earns through lending.
Goldman's analysts see Schwab outperforming
E Trade Financial
(ETFC - Get Report)
(AMTD - Get Report)
, but still believe "upside in the stock is limited."
Shares of Schwab were down by 1.15% a few minutes after the opening bell Wednesday. Ameritrade and E Trade shares were also lower.
Written by Dan Freed in New York
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