RBS preferreds strengthen on earnings; Citigroup ends mostly firm; Montpelier gives back gains

By Stephanie N. Rotondo

Portland, Ore., May 6 - A trader said it was "mostly green" in the $25-par preferred stock space on Friday, though he noted that it was mixed in the capital securities arena.

Royal Bank of Scotland Group plc reported first-quarter earnings during the session. The results were better than expected, which gave the bank's preferred shares a boost.

Also in the financial realm, Citigroup Inc. continued to see a decent amount of action. The preferreds were mostly higher, helped out in part by a news report that opined the financial institution could return as much as $64 billion to shareholders.

RBS strengthens post-earnings

Royal Bank of Scotland Group's preferreds were mostly higher after the bank reported its first-quarter results.

"They are doing much better and could turn their dividend back on," a trader said.

The 6.125% series R preferreds were up 19 cents to close at $17.46, while the 6.25% series I preferreds gained the most, closing 21 cents higher at $16.05.

On the flip side, the 7.25% series H preferreds lost 11 cents to close at $23.62.

Another trader said the most-active RBS issue was the 5.75% series L preferreds, which gained 8 cents to close at $19.18.

For the quarter, the Scotland-based bank posted a loss of $841.5 million, due in part to bad loans from its Irish units.

RBS' core business, however, saw earnings increase by 25% to $3.45 billion.

"RBS is pulling off the recovery that we have targeted," said Stephen Hester, chief executive officer, during a conference call. The company also said that it expected the bad Irish loans to decline in the second half of the year.

RBS is 83% owned by the U.K. government after receiving bailout funds during the economic crisis.

Citi ends mostly firm

A Bloomberg report out Friday indicated that Citigroup could pay out as much as $64 billion through 2014 for dividends and stock repurchases.

A trader said that if the New York-based financial institution did elect to do a stock buyback, "it could definitely run [the common stock] up quickly."

The article helped Citi's preferreds gain traction, though the preferreds have been active and mostly firmer all week.

The Cit 6% series Q preferreds were once again the day's most popular issue, with 3.14 million shares changing hands. The preferred stock gained nearly 19 cents to close at $23.139.

The 7.875% series N preferreds were also busy, with 1.68 million shares turning over. Those preferreds were unchanged at $28.04.

The Bloomberg article cited Morgan Stanley analyst Betsy Graseck as saying that Citi could pay dividends equal to up to 9% of its market capitalization, or about $12 billion.

Montpelier gives up gains

Montpelier Re Holdings Ltd.'s new 8.875% perpetual non-cumulative preferreds "traded off a little bit," a trader said.

He quoted the paper at $25.20 bid, $25.30 offered, down 3 to 5 cents on the day.

The deal priced on Tuesday and quickly broke par.

Montpelier Re is a Bermuda-based reinsurance company.

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