Decent bank earnings drive preferred stock market higher; recently priced deals in focus

By Stephanie N. Rotondo

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

The Wells Fargo Hybrid and Preferred Securities index closed 31 basis points better after being up just 9 bps 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 not much going on in bank preferreds.

Wells Fargo’s 5.5% series X noncumulative preferreds (NYSE: WFCPX) were one of the only active bank issues of the day, at least among those that just came with earnings. That issue did trade lower during the session, but ultimately closed up 14 cents at $26.01.

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.

The preferreds finished at $25.95, recouping the 5 cents lost in the previous trading session. The issue traded as high as $26.10 on the day.

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, a trader said at midday.

At the close, a market source placed the notes at $25.05, with a volume weighted average price of $25.0685.

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.

At the bell, the preferreds were pegged at $24.94.

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