Preferred stocks downtrodden as European banks slide; Deutsche Bank sees slight rebound

By Stephanie N. Rotondo

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

The Wells Fargo Hybrid and Preferred Securities index finished down 100 basis points. The index was off 115 bps 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) declined by 50 cents, or 2.26%, to $21.65. By comparison, the preferreds were off $1.27, or 5.73%, at $20.88 in early trading.

The 8.05% TruPs (NYSE: DKT) also pared their losses, though the securities still closed down 37 cents, or 1.63%, at $22.33. Those shares were down $1.18, or 5.2%, at $21.52 at mid-morning.

And, the 6.55% TruPs (NYSE: DXB) – the most actively traded security in the Deutsche structure, as well as for the day with 2.26 million shares exchanged – ended down 37 cents, or 1.8%, at $20.13.

Even corporate bond traders were noting the weakness in foreign banks and in Deutsche Bank in particular.

“Deutsche Bank is really coming in,” one bond trader said. He said the company’s longer-dated debt was off as much as 6 to 7 points on the day.

As for the preferreds, the pared losses came after it was reported that the bank was considering buying back up to €50 billion in debt.

Deutsche Bank wasn’t the only European bank to get hammered during the session. Barclays Bank plc’s 8.125% series 5 noncumulative callable dollar preference shares (NYSE: BCSPD) dropped 12 cents to $25.02, on about 1.04 million shares traded.

Notably, trading in Barclays’ common stock was suspended on the London Stock Exchange on Monday after falling 5.3%. The plunge in the equity was seen driven by concerns about Deutsche Bank, which is often viewed as comparable to Barclays.

Recent deals list

Among recently priced deals, 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 $24.58 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 $24.40 from $24.75.

© 2015 Prospect News.
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