Charles Schwab, Iberia new issues firm up in trading; Freddie, Fannie preferreds improve

By Stephanie N. Rotondo

Phoenix, Aug. 4 – The preferred stock market was firm as Tuesday trading got underway but gave up those gains by the end of the day.

The Wells Fargo Hybrid and Preferred Securities index was up 5 basis points at mid-morning but closed off 1 bp.

One market source deemed the overall performance as “essentially flat.”

Among recent deals, the Charles Schwab Corp.’s $600 million of 6% series C noncumulative preferreds were trading actively, with just over 1 million shares being exchanged.

The issue ended the session off 3 cents at $25.20. Earlier in the day, a trader quoted the preferreds at $25.20 bid, $25.30 offered.

That deal came July 27 via BofA Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC. The paper is slated to begin trading on the New York Stock Exchange on Wednesday.

The ticker symbol will be “SCHWPC.”

In secondary trading, Fannie Mae and Freddie Mac preferreds were “jumping up,” according to a trader, after Freddie reported “decent earnings.”

Meanwhile, Royal Bank of Scotland Group plc paper fell slightly after the U.K. government began selling its stake in the Edinburgh, Scotland-based bank.

Freddie sees bigger profit

A source said that the market “responded favorably” to fresh earnings out of Freddie Mac on Tuesday.

Freddie’s 6.55% noncumulative perpetual preferreds (OTCBB: FMCKI) improved 10 cents, or 2.33%, to $4.40. Fannie Mae’s 8.25% series S noncumulative preferreds (OTCBB: FNMAS) rose 2 cents to $4.97.

At mid-morning, the latter issue was up 28 cents, or 5.66%, at $5.23.

For the second quarter, mortgage giant Freddie reported net income of $4.2 billion. That compared to income of $1.4 billion for the same period of 2014.

The quarter marked the GSE’s 15th consecutive quarterly profit.

The better results were attributed to higher home loan purchases and to the selling of riskier mortgages.

Given the amended terms of its conservatorship, the U.S. government will take the bulk of the quarter’s profits. Freddie intends to pay back $3.9 billion to taxpayers, bringing its total dividend payments to $96.5 billion.

Freddie received $71 billion in bailout funds in September 2008.

RBS shares slip

Royal Bank of Scotland preferreds were active but weaker on Tuesday as the U.K. government sold off 5.4% of its stake in the bank.

The stake sale was done at a loss to taxpayers.

The 6.35% series N noncumulative dollar preference shares (NYSE: RBSPN) fell a penny to $25.26, while the 6.25% series P noncumulative dollar preference shares (NYSE: RBSPP) slipped a like amount to $25.24.

Both issues were recently called for Sept. 1.

The United Kingdom raised £2.1 billion in the stock sale, which was about a third of what it originally paid for the shares in 2008 and 2009.

The 330p per share price was a 7.6% discount to Monday’s closing share price.

With the sale, the government’s holdings in the company fell to 73%.

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