Dec 9 (Reuters) - Goldman Sachs analyst Daniel Harris assumed coverage of U.S. discount brokers with a “neutral” view and said low interest returns and falling equity markets are likely to keep near-term valuations depressed.
In a note to clients, Harris said TD Ameritrade Holding Corp (AMTD.O) and Charles Schwab Corp SCHW.O will outperform their peers over the next six months as disgruntled investors are likely to continue moving assets from full-service brokers to discount firms.
Harris expects daily average revenue trades, or DARTs, a key measure of trading activity for retail brokerage firms, to fall 18 percent in 2009, adding that the estimate may prove conservative if negative equity markets persist.
Goldman economists are expecting a further 50 basis point cut in interest rates, and Harris said optionsXpress Holdings Inc OXPS.O earnings will be among the most impacted on a percentage basis from any additional decline in Fed Funds rates.
Harris also said about $340 million in capital is needed to keep E*Trade Financial Corp (ETFC.O) well capitalized through the end of 2009.
For alerts, please double click [ID:nWNAB0952] (Reporting by Santosh Nadgir in Bangalore; Editing by Anil D‘Silva)