Preferreds rally amid debt-ceiling deal; Goldman firms after revenue miss; BB&T profit off

By Stephanie N. Rotondo

Phoenix, Oct. 17 - A preferred stock trader said that "everything is up in the secondary market," as investors reacted to the government's last-minute deal to reopen and avoid hitting the debt ceiling.

He estimated that most securities were up 20 to 25 cents. According to the Wells Fargo Hybrid and Preferred Securities index, the market was up 42 basis points at midday, or 10.5 cents on average for $25-par paper.

By the end of business, the Wells Fargo index had jumped 55 bps, or about 14 cents on average. A market source noted that volume had "improved dramatically" from earlier in the week.

However, there continued to be "no talk of any new deals," a trader said.

"Maybe we'll see some next week now that everything has calmed down," he said.

Another source said he heard Crowley Holdings Inc., a maritime shipping company, had completed a Rule144A placement of $200 million 10% preferreds on Wednesday.

"It was all done very quietly," he said, adding that DNB Capital Markets was the lead underwriter. He also remarked that it was "mind boggling" that the company was able to raise so much, even at 10%, given overall industry risk and the fact that the deal was nonrated.

Goldman Sachs & Co. reported earnings early in the day. Despite a 20% decline in revenues - the largest thus far on Wall Street - the investment bank's preferreds were rising.

BB&T Corp. was also firmer, even as the bank posted a decline in profit due to a tax charge.

Morgan Stanley Co. Inc. and Discover Financial Services Inc. are slated to report earnings on Friday and Monday, respectively. Ahead of the releases, Morgan Stanley's 7.125% series E fixed-to-floating rate noncumulative preferreds (NYSE: MSPE) rose 9 cents to close at $25.75, while Discover's 6.5% series B noncumulative preferreds (NYSE: DFSPB) slipped 2 cents to $23.38.

Goldman revenues shrink

Goldman Sachs reported an increase in its third-quarter net income, even as its revenues dropped 20%.

Still, the company's preferreds fared better on the day.

The 5.95% series I noncumulative preferreds (NYSE: GSPI) - the most active of the Goldman issues - moved up 18 cents to $22.82, as the floating-rate series D noncumulative preferreds (NYSE: GSPD) increased a penny to $20.27.

The 5.5% series J fixed-to-floating rate noncumulative preferreds (NYSE: GSPJ) improved by 16 cents, ending at $22.90.

For the quarter, the New York-based company posted net income of $1.52 billion, or $2.88 per share. That compared to a profit of $1.51 billion, or $2.85 per share, the year before.

But revenue took a massive hit, especially in the company's bond-trading unit.

Total revenue came to $6.72 billion, a 20% decline year over year and well short of the $7.35 billion expected on average by analysts polled by Bloomberg.

Revenue from bond trading was $1.29 billion, a 47% drop.

The company attributed the weak numbers to "slow client activity" amid the federal government turmoil. Management suggested that if those issues are resolved, investors would be more willing to invest.

Still, Goldman managed to cut costs by 25% during the quarter, including a 35% reduction in compensation.

BB&T takes profit hit

BB&T also put out earnings on Thursday, and despite a 43% decline in profit, its preferreds remained strong.

The 5.625% series E noncumulative preferreds (NYSE: BBTPE) closed at $20.78, up 23 cents, or 1.12%.

The Winston-Salem, N.C.-based bank saw a profit of $268 million, or 37 cents per share, for the third quarter. For the same quarter of 2012, profit was $469 million, or 66 cents per share.

Excluding one-time charges, the company had earnings of 70 cents per share, the average estimate of analysts polled by Bloomberg.

The profit was impacted by a $235 million tax adjustment in regards to a lost court case with the Internal Revenue Service.

CYS sees quarterly gain

CYS Investments Inc., a New York-based real estate management trust, saw its preferreds rising after the company held its third-quarter conference call early Thursday.

The company released its results late Wednesday.

The 7.5% series B cumulative redeemable preferreds (NYSE: CYSPB) put on 18 cents to close at $20.60.

Net income for the third quarter was $25.4 million, or 14 cents per share, versus a loss of $402.3 million, or $2.32 per share, in the second quarter of 2013.

Liquidity was approximately $1.3 billion, or 65.9% of net assets, compared to $1.3 billion, or 65.4% of net assets at June 30.

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