Preferred stocks rebound; Charles Schwab new issue frees, trades above par; JPMorgan rises

By Stephanie N. Rotondo

Phoenix, July 28 – Preferred stocks reversed course Tuesday as investors looked to push the market into higher territory.

The Wells Fargo Hybrid and Preferred Securities index rose 9 basis points by the end of business.

The return of strength to the space was also helping recently priced issues.

The Charles Schwab Corp.’s $600 million of 6% series C noncumulative perpetual preferreds – a deal priced Monday – was already trading over par, according to a trader.

The trader quoted the issue at $25.03 bid, $25.08 offered.

Another market source pegged the paper at $25.10.

The issue freed to trade early in the day.

BofA Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC ran the books.

Proceeds will be used to support balance sheet growth, including the migration of certain client balances from sweep money market funds into Schwab Bank, which may be subject to notice and/or approvals from clients and regulators.

Among other recent deals, a trader said JPMorgan Chase & Co.’s $1.1 billion of 6.15% series BB noncumulative preferreds – a deal priced Wednesday via J.P. Morgan Securities LLC – was also firming up, seeing the issue at $24.86 bid, $24.90 offered.

Those preferreds ended at $24.93, a gain of 11 cents.

Between the two deals, the trader remarked that the Schwab issue “should run up” like the company’s series B preferreds, another 6% noncumulative issue that trades at a significant premium.

Those shares (NYSE: SCHWBPB) ended at $25.85, unchanged day over day.

The trader noted that Schwab’s outperformance of the recent JPMorgan deal was likely due to the fact that Schwab only has the two outstanding issues, whereas JPMorgan has a myriad preferreds in its capital structure.

IberiaBank to bring new issue

One new deal was announced later in the session, an offering of series B fixed-to-floating rate noncumulative preferreds from IberiaBank Corp.

BofA Merrill Lynch and UBS Securities are running the books.

Dividends will be fixed and payable semiannually through Aug. 1, 2025. After that date, the dividend will float at Libor plus a spread and will be paid quarterly.

The preferreds become redeemable at par plus accrued dividends on Aug. 1, 2025. The company can also redeem the issue in whole within 90 days of a regulatory capital treatment event.

IberiaBank will apply to list the new securities on the Nasdaq Global Select Market under the symbol “IBKCP.”

The Lafayette, La.-based financial holding company will use proceeds for general corporate purposes, including to fund possible acquisitions, working capital needs and investments in subsidiaries to support growth.

Fannie, Freddie mixed

Fannie Mae and Freddie Mac preferreds were quite busy but mixed in Tuesday trading.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) rose 4 cents to $4.57, with about 2.68 million shares trading. Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ), however, were off a penny at $4.54, on about 5.66 million shares trading.

There was no fresh news out on the mortgage giants to explain the surge in activity, a market source said.

“There was no major fundamental story out today, which could explain why one was up and the other down,” the source said. “There was an article this morning about a couple of the hedge funds that invested in them and [how] poorly they have done.”

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