Capital One releases earnings, preferreds rise; Pebblebrook up on additional sale; Ally mixed

By Stephanie N. Rotondo

Portland, Ore., July 13 - The preferred stock market was "definitely better than yesterday," a market source reported Wednesday.

"There was a severe attitude adjustment on the downside yesterday," he continued. During Wednesday trading, he saw sentiment "swinging to a more reasonable view."

That view was helped in part by an early earnings release from Capital One Financial Inc. The bank reported a 50% increase in profits, which helped its preferreds gain some ground. However, trading was light.

Capital One's results kicked off the earnings season. Several other banks and financial institutions are expected to report over the next few weeks.

Elsewhere, Pebblebrook Hotel Trust announced on Tuesday that it agreed to sell an additional $15 million of its series A preferreds at a premium, and Wednesday's session saw the outstanding preferreds jump to the new price.

Among the day's most actively traded issues were Ally Financial Inc.'s two series of preferreds. The issues closed the day mixed.

A source said that the market was "on the brink" of multiple news announcements that could have some effect on how preferreds perform in the near term. On Friday, the European Banking Commission will release the results of a second round of stress tests. The results are expected to hit about midday on the East Coast.

Capital One rises on earnings

Capital One made an "unscheduled earnings release because of their common equity deal," a market source said.

"They can't really do the deal then release the earnings," he explained. "That's just begging for a lawsuit."

Though the bank's second-quarter earnings were about 50% better than the previous year, trading in the preferreds was "very light," the source said.

"They were slightly better than expected earnings," he said. "I'm sure that didn't hurt market sentiment."

The company's 7.5% preferreds (NYSE: COFPB) inched up a penny to close at $25.38.

For the quarter, Capital One posted a net profit of $911 million, or $1.97 per common share. That compared to $608 million, or $1.33 per share, the year before.

Revenue increased 2.3% to $3.99 billion.

Analysts polled by Thomson Reuters had predicted earnings of $1.71 per share on revenues of $4.02 billion.

By announcing the results early, Capital One can now go forward with a $2 billion common stock sale. The company planned to do the offering in conjunction with its purchase of ING Direct from ING Groep NV.

Also, in releasing its earnings sooner than expected, Capital One is the first financial institution to report quarterly results.

A source said that there are "heavy earnings announcements" coming in the next few weeks from the financial sector. JPMorgan Chase & Co. will report Thursday, and Citigroup Inc. will post on Friday.

"That could help set a significantly firmer tone" for the preferred market, the source said.

Among other financials, Goldman Sachs Group, Inc.'s preferreds (NYSE: GSF) gained 9 cents to close at $25.05. Volume was about 779,500 preferreds, making the security the third top traded issue. A source said the gain was likely because "things in general were looking better in Europe. Marginally."

Pebblebrook prices add-on

Bethesda, Md.-based real estate investment trust Pebblebrook Hotel Trust said Tuesday that it agreed to sell an additional $15 million of its 7.875% series A cumulative redeemable preferreds to a single investor.

The 600,000 preferreds (NYSE: PEBPA) were sold at $25.25 each for a total price of $15.15 million. On Wednesday, the preferreds rose to that level, though trading was thin.

Pebblebrook will release earnings on July 26.

In other REITs, Endurance Specialty Holdings Ltd.'s 7.5% series B noncumulative preferreds (NYSE: ENHPB) increased by a dime to $25.05.

Ally trading dominates

Trading in the aptly dubbed "Ally sisters" was heavy and mixed in the midweek session.

In the 8.5% series As (NYSE: ALLYPA), about 1.27 million preferreds changed hands, losing a nickel to finish at $25.25.

The 8.125% series Bs (NYSE: ALLPB) meantime rose 4 cents to $24.76. Volume was 1.58 million preferreds.

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