Morning Commentary: Preferreds downtrodden as European banks slide; recent preferred deals list

By Stephanie N. Rotondo

Seattle, Feb. 9 – Preferred stocks remained weak in early Tuesday trading following Monday’s massive sell-off.

The Wells Fargo Hybrid and Preferred Securities index was off 115 basis points at mid-morning. On Monday, the index closed off 166 bps.

“A lot of banks are getting clobbered,” a trader said. European banks – and even more specifically, Deutsche Bank AG – were taking the biggest hits as concerns about credit risk grow.

Deutsche Bank’s paper continued to be under immense pressure, even as the company issued a statement that said the German bank was “rock solid,” with enough liquidity to pay its debt obligations “well into 2016 and 2017,” a trader paraphrased.

Still, the 7.6% trust preferred securities (NYSE: DTK) were off $1.27, or 5.73%, at $20.88 in early trading. The 8.05% TruPs (NYSE: DKT) were down $1.18, or 5.2%, at $21.52.

Meanwhile, Citigroup Inc.’s 6.3% series S noncumulative preferreds – a deal priced Jan. 26 – listed on the New York Stock Exchange on Tuesday, according to a trader.

The ticker is “CPS.” Paper was following the overall trend, falling to $24.46 versus $24.65 at the open.

The bank initially sold $900 million of the preferreds. Once the greenshoe was exercised, total issuance was lifted to $1.35 billion.

Also listed were Banc of California Inc.’s $125 million issue of 7% series E noncumulative preferreds.

The ticker is “BANCPE.” The deal priced Feb. 1, coming upsized at $125 million from $50 million.

Those preferreds were also trading soft, slipping to $24.60 from $24.75.

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