March 17 (Reuters) - Friedman Billings on Monday lowered its rating on Charles Schwab SCHW.O and TD Ameritrade Holding Corp (AMTD.O), saying their relatively "safe" businesses will experience slower client growth and trading activity amid concerns about the weak economy.
The brokerage cut its rating on Schwab to "underperform" from "market perform" and Ameritrade to "market perform" from "outperform".
Friedman cut the price target on Schwab by $2 to $18 and on Ameritrade by $3 to $18 to reflect slowness in earnings growth for the discount brokers.
"We expect consumer concerns regarding the economy, unemployment, and the housing market to manifest itself into the beginning of a sustained trend of reduced client activity," Friedman said in a research note.
The brokerage also said margin compression is beginning to materialize due to additional declines in short-term interest rates.
Schwab shares have fallen 22 percent year-to-date, while Ameritrade has lost about 17 percent of its value, as investor sentiment fell considerably, significantly slowing up retail trading activity.
February daily average trades for Schwab fell 22 percent on a sequential basis, reflecting a decline in U.S. markets and a slowdown in the industry.
In morning trade on Nasdaq, Schwab shares were trading down 2 percent at $19.39, while Ameritrade shares were down 2.2 percent at $16.10.
Shares of rival E*Trade Financial Corp (ETFC.O), whose shares have plunged amidst concerns of exposure to risky mortgage securities, were down 8 percent at $3.34 on Nasdaq. (Reporting by Dinesh Nair; Editing by Bernard Orr)