Skip to main content



) --

The Charles Schwab Corp.

(SCHW) - Get Charles Schwab Corporation 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

Fannie Mae



Freddie Mac


following the

Federal Reserve's

announcement last week that it would buy long-dated RMBS in an effort to boost the housing market.

TheStreet Recommends

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 E*TRADE Financial Corporation Report



(AMTD) - Get TD Ameritrade Holding Corporation 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


Follow this writer on



Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.