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Midday Commentary: RBS creates 'bad bank,' releases earnings; other issues trade 'sparingly'
By Christine Van Dusen
Atlanta, Nov. 1 - Preferred stock from Royal Bank of Scotland dominated trading among preferreds on Friday morning as the company announced plans for addressing its bad assets and reported earnings, a trader said.
RBS is creating a "bad bank" called RBS Capital Resolution to manage down about £38 billion of its riskiest assets, which consume about 20% of the company's capital, according to an announcement from the bank.
RBS also will move more quickly to complete its initial public offering of Citizens, beginning in the second half of 2014 with completion slated for the end of 2016, the bank said.
For the third quarter of 2013, the company's pre-tax loss was £634 million, after a £496 million accounting charge.
The company's 6.4% non-cumulative dollar performance shares (NYSE: RBS-PM) traded at $21.72 on Friday morning, up 37 cents on volume of 315,415.
RBS Capital Funding Trust VII's 6.08% non-cumulative guarantee trust preferred securities (NYSE: RBS-PG) moved up 37 cents to $22.27 on volume of 267,170.
And the company's 7¼% non-cumulative dollar preference shares (NYSE: RBS-PT) were quoted at $24.21 on Friday morning, up 14 cents on volume of 169,308.
Meanwhile, recent new issues in the space changed hands "sparingly" with mostly flat prices, a trader said.
City National Corp.'s new 6¾% series D fixed-to-floating rate noncumulative preferred stock moved to between $25 and $25.25 after trading in the gray market on Thursday at $24.88.
A total of $100 million shares were sold. The dividend will be fixed until Nov. 7, 2023, when the preferreds will reset to Libor plus 405.2 basis points.
Among other recent deals, F.N.B. Corp.'s $100 million of 7.25% series E fixed-to-floating rate noncumulative perpetual preferreds - a deal that came Tuesday - were "pretty much an issue bid," the trader said.
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