Ally preferreds weaken on general market, mortgage settlement reaction; ING pressured again

By Stephanie N. Rotondo

Portland, Ore., Feb. 10 - The preferred stock market closed out the week on a negative note as investors once again grew nervous about the goings-on in Greece.

"I think people realized that the agreement that they were so euphoric over wasn't really a definitive agreement," a market source said, referring to news out earlier in the week regarding a second bailout plan for the faltering country. The tentative agreement reached between Greece and European leaders fell apart Friday. The Greek people violently opposed the additional austerity measures called for by Europe, and some party leaders chose to resign from the parliament in protest.

As such, the softer market was blamed on investor panic and "people not wanting to hold over the weekend," the source said.

Ally Financial Inc. was experiencing "more fallout from the mortgage settlement," the source added. Ally preferreds rose slightly on Thursday on news that the bank and four others had reached a settlement with 49 states. But the gains were short-lived come Friday.

ING Groep NV was also continuing to be active. On Thursday, ING had reported earnings that fell below market expectations. The preferred complex ended that session mixed, and it finished Friday in a decline.

Ally loses ground

Ally Financial dominated trading in the preferred market on Friday as investors continued to digest Thursday's news of the mortgage settlement of Ally and four other banks.

The 8.5% trust preferreds (NYSE: ALLYPA) fell 45 cents to $22.80, according to a market source. Nearly 1.3 million trust preferreds changed hands.

The 8.125% series A fixed-to-floating preferreds (NYSE: ALLYPB) meantime dropped a quarter, or 1.14%, to $21.70.

A source opined that the losses were tied to Thursday's news of a $25 billion mortgage settlement reached by Ally, Bank of America Corp., J.P. Morgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. with 49 U.S. states.

The settlement was in regards to improper mortgage servicing and foreclosure practices.

Under the terms of the settlement, the five banks will commit $20 billion to mortgage relief. Another $5 billion will be paid directly to state and federal governments.

However, the deal has come under fire already for not providing enough relief to homeowners. For example, one relief program planned would give homeowners who were illegally foreclosed on a cash payment of up to $2,000 - but the homeowners would not get their homes back.

Other banks involved in the settlement were also seeing weakness in their preferreds. For instance, the 7% capital securities (NYSE: CFCPB) of Bank of America's Countrywide Financial Corp. - "that bad boy of the mortgage business," a source said - lost 4 cents to end at $23.28.

ING paper gets hit

ING Groep preferreds were also losing ground Friday, and a source said that was "reflective of earnings" released on Thursday.

The 7.375% perpetual hybrid capital securities (NYSE: IDG) fell 33 cents, or 1.41%, to $23.07, while the 8.5% perpetual hybrid capital securities (NYSE: IGK) lost 40 cents, or 1.57%, to $25.10.

The 6.2% perpetual debt securities (NYSE: ISP) had the biggest percentage loss of the ING issues, dropping 33 cents, or 1.65%, to $19.72.

The Amsterdam-based financial institution said in its earnings release Thursday that the European debt crisis was taking a toll on the financial sector and that it had increased its loan loss provisions by 21% due to its exposure to Greek debt. Also, it took a €199 million writedown on Greek sovereign debt, an 80% loss.

Net profit was €1.19 billion. Analysts polled by Reuters had forecast profit of €1.34 billion to €2.45 billion.

"In general, [earnings] weren't so bad," a source said. "But the bottom line didn't look so good."

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