First Republic prices issue; RBS mixed after selling aviation unit; Citi earnings disappoint

By Stephanie N. Rotondo

Portland, Ore., Jan. 17 - Preferred stocks edged higher in Tuesday trading, according to market sources.

"It was a little bit of a surprise, what with the European downgrade on Friday," a source said.

The new issue market remained active. First Republic Bank priced series A noncumulative perpetual preferreds, which were trading around par in the gray market.

In secondary dealings, Royal Bank of Scotland Group plc was generally firmer, although the most active issues under the RBS umbrella were slightly weaker. The action came as the Edinburgh-based bank announced it had sold off its aviation leasing unit, part of the company's plan to divest its non-core assets.

Citigroup Inc. meantime was on the decline following a weak quarterly report. The securities were among the day's biggest losers, according to a source.

First Republic prices

First Republic Bank announced plans for a public offering of series A noncumulative perpetual preferred stock in a press release published Tuesday. It priced the $199.53 million issue at 6.7% after the market closed.

Price talk was around the 6.75% area, according to a trader.

"There's no selling group," he said, seeing the preferreds trading around par in the gray market.

"It was selling like hotcakes," another source said. He quoted the issue at $24.93 bid, $24.98 offered.

"That's actually pretty good," he said.

The San Francisco-based private bank and wealth management company will issue the preferreds as depositary shares representing 1/40th of an interest in the series A preferreds. The price is $25 per depositary share.

Bank of America Merrill Lynch, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are the joint bookrunners.

Proceeds will be used for general corporate purposes, including the redemption of First Republic Preferred Capital Corp.'s 10.5% series A noncumulative perpetual preferreds and 7.25% series D noncumulative perpetual preferreds. A trader remarked that the company was required to call the 7.25% preferreds in the event it called the 10.5% paper.

RBS busy, mixed

Royal Bank of Scotland preferreds were again trading actively during Tuesday's session, following news the bank sold its aviation leasing unit to Sumitomo Mitsui Financial Group Inc. for about $7.3 billion.

The 7.25% series T noncumulative dollar preference shares (NYSE: RBSPT) were among the top five most actively traded issues. The paper fell 4 cents to $16.39. The 6.6% series S noncumulative dollar preference shares (NYSE: RBSPS) were also busy but higher, gaining 12 cents to close at $15.33.

The sale of the unit is expected to close by the end of the third quarter. RBS has been aggressive of late in its efforts to divest non-core units to help shore up its balance sheet. The bank could also sell off much of its insurance unit this year.

Citigroup falls off

Citigroup's 7.5% T-DECS tangible dividend enhanced common stock (NYSE: CPH) were "way off," a market source said, after the New York-based bank reported weak earnings.

The $100-par preferreds fell $5.02, or 5.47%, to $86.78. The issue was among the day's biggest percentage losers of the day.

For the fourth quarter, Citigroup reported earnings of $1.16 billion, or 38 cents per share. That was an 11% decline and well down from the 50 cents per share analysts had been expecting.

Revenues for the quarter fell 7% to $17.2 billion.

The company attributed the weaker figures to the ongoing reduction of its Citi Holdings assets.

But the results were not all bad. For the full year, Citigroup saw a 6% gain in net income, which came to $11.3 billion.

Revenues were lower at $78.4 billion, compared to $86.6 billion the year before.

The bank has tier 1 common securities of $115.1 billion. The tier 1 ratio increased to 11.8%.

"Clearly, the macro environment has impacted the capital markets, and we will continue to right-size our businesses to match the environment," Vikram Pandit, chief executive officer, said in the earnings release.

Greek bank gains

National Bank of Greece SA's 9% series A noncumulative preference shares (NYSE: NBGPA) moved up 39 cents, or 9.49%, to $4.50 after the Athens-based lender said it had wrapped up a repurchase of covered bonds and hybrid securities.

The bank bought back covered bonds due 2016 as well as five series of preferreds in an effort to improve its capital base.

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