Deutsche Bank paper lower on restructuring plan; Ally preferreds mixed as earnings on tap

By Stephanie N. Rotondo

Phoenix, April 27 – The preferred stock market had a firm tone as the new trading week began but came in by the end of business to finish a touch lower.

The Wells Fargo Hybrid and Preferred Securities index closed down 1 basis point. The index was up 8 bps at mid-morning.

Despite the overall market strength, Deutsche Bank AG’s preferreds were softer after the Frankfurt-based bank announced a restructuring plan that would cut €200 billion in assets from its investment banking portfolio.

The plan’s main goal was to target savings of up to €3.5 billion per year.

That news came on the heels of the bank’s earnings over the weekend. Deutsche reported a smaller profit for its first quarter, despite a 24% gain in revenue.

The smaller profit was attributed to legal expenses – such as the $2.5 billion fine levied last week over alleged interest rate manipulation.

The 6.55% trust preferreds (NYSE: DXB) came in 8 cents to $26.59, while the 7.6% TruPS (NYSE: DTK) fell a similar amount to $28.26.

Looking toward the week’s primary calendar, a trader said there was “nothing new on the horizon” as of yet but that he hoped the pipeline would continue to churn out deals.

Ally mixed ahead of earnings

Ally Financial Inc.’s preferreds were mixed as investors prepared for the company’s earnings release.

The numbers are slated to be published ahead of Tuesday’s open.

The 8.125% series 2 fixed-to-floating rate trust preferred securities (NYSE: ALLYPA) ended 2 cents weaker at $26.29, but the 8.5% series A fixed-to-floating rate perpetual preferreds (NYSE: ALLYPB) rose 6 cents to $27.05.

As previously reported, the Detroit-based lender said last week that it had launched a cash tender for up to $325 million of the 8.5% series A preferred shares.

For the first quarter, Ally is expected to see a one-time gain of about $400 million related to a sale of its stake in a Chinese joint venture. Investors might also be looking at how the company is contracting with auto dealers after General Motors Co. dropped Ally for an in-house lender.

On Monday, the company announced that it was named the preferred lender for Mitsubishi Motors Corp.

Morgan Stanley’s redemption

After the bell, Morgan Stanley & Co. Inc. announced a redemption of all of its outstanding 6.6% capital trust VI securities (NYSE: MSJ) and all of its 6.6% capital trust VII securities.

Prior to the news, the shares were trading up.

The capital VI shares closed up a penny at $25.65. The capital VI securities finished 7 cents better at $25.77.

The capital VI shares will be redeemed on May 27 at par plus 11.9167 cents in unpaid and accrued dividends.

A total of $862.5 million shares will be redeemed.

In the capital VII paper, holders will receive par plus 12.375 cents on May 12.

About $1.1 billion of those securities will be taken in.

The redemption of both issues is being done concurrently with a call of the junior subordinated debentures that underlie the trust securities.

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