B of A, Huntington, Fifth Third snap back on bailout talk, Wells Fargo weakens; Newmont Mining up

By Rebecca Melvin

New York, Feb. 5 - After weakening for much of the week, financial convertibles staged a dramatic turnaround Thursday that put them front and center of market activity, sources said.

"It was primarily financial preferreds today," a New York-based sellside analyst said.

Spurring the improved tone were comments from Sen. Christopher Dodd (D-Conn.), who said he didn't foresee nationalization of Bank of America Corp., as well as other reports that the government bailout plan for financial services companies may include ending mark-to-market accounting, at least temporarily, sources said.

Bank of America shot up by 6 points by early afternoon after starting the day suffering further losses.

Huntington Bancshares Inc. convertible preferred shares jumped 20% to 335 from trades early Thursday.

Fifth Third Bancorp also recovered as did Citigroup Inc.

"Citigroup preferreds closed at 13. I had a big buyer of those at 11.5," a New York-based sellside trader said.

Wells Fargo & Co., which never sunk to the depths that some of the other financial paper did, settled around 540, which was lower than 575 reported to Prospect News on Wednesday.

Elsewhere, Newmont Mining Corp. was firm in active trade as the group of gold companies benefited from a rise in gold futures for the second consecutive day.

B of A regains ground

Bank of America's series L 7.25% convertible preferreds settled at about 344 after trading as low as 272.5 earlier in the session. On Wednesday, the B of A paper had settled at 360.

"Things started to turn around at about 11 a.m.," a sellsider said.

The paper had weakened throughout the week's prior sessions, having traded at 460 on Monday amid investor fears that the government might have to step in to nationalize the bank to prevent it from failing.

Shares of the Charlotte, N.C.-based bank also traded lower after the opening bell Thursday but staged an intraday turnaround, ending the session up 14 cents, or 3%, at $4.84. Prior to the turnaround, the shares marked a multi-decade low.

It is "looking like people don't want B of A nationalized," a West Coast-based sellside trader said via e-mail.

Sen. Dodd's simple remark dispelled talk the government would nationalize Bank of America. When asked by a reporter whether the government should nationalize the bank, he said "No, I don't."

Meanwhile, traders were heartened by talk of discontinuing mark-to-market rules, under which banks must record securities' prices at market levels to ensure that margin requirements are being met. "That would help," one analyst said of discontinuing mark to market.

Another sellsider said that the plan is expected to be unveiled by Treasury secretary Timothy Geithner on Monday, and he said that suspending mark to market would be "so much better than having the government writing checks."

Meanwhile the U.S. Senate was weighing a $900 billion stimulus package that may be voted on as soon as Thursday.

Huntington bounces back

Huntington Bancshares' 8.5% convertible perpetual preferred settled up at 335 after trading as low as 280 versus a share price of $1.44 and also at 300 versus a share price of $1.70 earlier in the session.

Shares of the Columbus, Ohio-based regional bank closed up 35 cents, or 24%, at $1.79. The shares slumped 20% on Wednesday.

Citigroup's 6.5% convertible preferred shares were seen closing at 13.

There were also plenty of buyers for Fifth Third, a sellsider said.

"People buying [the preferreds] are the old, value-style equity guys. They believe the common stocks may get diluted, but that the company survives, so getting 25% on the preferreds on a perpetual basis looks terrific," the sellsider said.

Wells Fargo lower

Wells Fargo's convertible preferreds, which are the old Wachovia preferreds, were the odd-man out, trading lower along with their underlying shares, and ending the day at 540, compared to 575 on Wednesday.

Last week the Wells Fargo preferreds traded at 650 when the preferred paper sector rallied a week ago.

Overall, there was a much better tone, a sellsider said.

But while things improved Thursday, no one was making any predictions about what Friday would bring.

"The problem is that there is so much uncertainty. And when anybody makes any comments in Washington - most of which is just noise - people are trading on whatever anybody says," a New York-based sellsider said.

Newmont trades higher

Newmont's 3% convertibles due 2012, which were initially priced last week, traded at 114.5 on Wednesday versus a share price of $41.00, compared to a close of 110 versus a stock price of $39.44 a week ago.

Newmont's series A 1.25% convertible senior notes due 2014 traded at 109, compared to 105.5 last Thursday.

Newmont's series B 1.625% convertible senior notes due 2017 traded at 107, compared to 105.5 last Thursday.

Newmont Mining is a Denver-based gold and copper mining concern. Gold prices have risen most of the week. But on Wednesday, Goldman Sachs said it expects gold to rise to $1,000 an ounce within three months, up 43% from the bank's previous forecast.

Gold futures for April delivery rose $12, or 1%, to $914.20 an ounce on the Comex division of the New York Mercantile Exchange, extending a 1% climb on Wednesday.

Mentioned in this article:

Bank of America Corp. NYSE: BAC

Citigroup Inc. NYSE: C

Huntington Bancshares Inc. Nasdaq: HBAN

Newmont Mining Corp. NYSE: NEM

Fifth Third Bancorp Nasdaq: FITB

Wells Fargo & Co. NYSE: WFC

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