Morning Commentary: Deutsche Bank remains under scrutiny, preferreds stabilize; new issues rise

By Christine Van Dusen

Atlanta, Oct. 4 – Preferred stock investors on Tuesday continued to eye Deutsche Bank AG as the German lender faced a U.S. fine of up to $14 billion for its handling of mortgage-backed securities.

On Friday, it was reported that Deutsche Bank was nearing a settlement that was well below the original amount proposed. But as of Monday morning, an agreement hadn't been presented to senior-level executives from either party, according to published reports.

On Tuesday morning, Deutsche Bank's 7.6% trust preferred securities (NYSE: DTK) were up nine cents, or 0.38%, at $23.59.

The 8.05% TruPS (NYSE: DKT) were stronger by 15 cents, or 0.63%, at $24.16. And the 6.55% TruPS (NYSE: DXB) ticked up 5 cents, or 0.22%, to $22.76.

“People are still worried about them. For them to be up a quarter, or whatever, is a non-event, since they were dropping precipitously before,” a trader said. “They've kind of settled in where they're at.”

Investors should view this as a “stabilization,” he said. “So we'll probably see the preferreds stay in this range for a little while.”

Other banks have not suffered from a contagion effect, he said.

“There's not much of a knock-on effort to other banks, even with politicians jawboning their positions,” he said.

Among recent new issues in the preferred stock market, City Office REIT Inc.’s $100 million of 6.625% series A cumulative redeemable preferreds (temporary symbol: CYORP) – a deal that priced Tuesday – were quoted on Tuesday morning at $24.90, up 3 cents.

And AmTrust Financial Services Inc.’s $287.5 million of 6.95% series F noncumulative preferred stock (NYSE: AFSIPF), admitted to the New York Stock Exchange on Thursday, rose 4 cents to $25.50 on Tuesday morning.

Also receiving attention on Tuesday was Southern Co.'s issue of $800 million $25-par series 2016A junior subordinated notes due 2076 that began trading on the NYSE last week with the ticker symbol “SOJB.”

BofA Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC were the joint bookrunners.

The notes were spotted Tuesday morning at $25.14, up 4 cents.

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