Morning Commentary: Decent bank earnings drive preferreds higher; recently priced deals remain in focus

By Stephanie N. Rotondo

Seattle, July 15 – Preferred stocks were looking to end the week on a high note Friday, as more bank earnings were released.

The Wells Fargo Hybrid and Preferred Securities index was up 9 basis points at mid-morning.

Wells Fargo & Co. put out its latest quarterly report, posting slightly lower earnings per share and revenues. However, EPS came in line with expectations and revenue was just short of forecasts.

Citigroup Inc. meantime released its earnings, topping expectations. The bank touted its cost-cutting efforts, as well as growth in its loan businesses.

On Thursday, JPMorgan Chase & Co. came out with its latest numbers, beating expectations due in large part to an increase in trading revenues.

While the news was seen as a positive for the preferred space, there was little going on in bank preferreds as of early Friday.

One trader speculated that with the “strong bank earnings,” the primary market source sees another uptick in issuance. However, “they might like to absorb everything that’s out there right now” before tapping the market, he noted.

As for the week’s new issues, Stifel Financial Corp.’s $150 million of 6.25% series A noncumulative perpetual preferreds – a deal priced Monday – were again surging, climbing to a $25.95 to $26.25 context, according to a trader.

From Tuesday’s business, Dominion Resources Inc.’s $800 million of 2016 series A $25-par junior enhanced subordinated notes due 2076 were slightly lower at $25.05 versus $25.07 as of Thursday’s close.

Also from Tuesday, Bluerock Residential Growth REIT Inc.’s $50 million of 7.625% series C cumulative redeemable preferreds were bid for at $25.15, a trader said.

And from Wednesday, Public Storage’s $300 million of 4.95% series D cumulative preferreds were quoted at $24.90 bid, $24.94 offered, about unchanged from the previous day.

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