Royal Bank of Scotland higher, active again; Ally loses as Treasury OKs ResCap filing

By Stephanie N. Rotondo

Portland, Ore., May 7 - Preferred stocks were "generally" up on Monday, according to a market source.

However, "among the most liquid issues, it was probably a little more mixed," he said. "Liquidity was not great, apart from new issues and 'story situations.'"

Those "story situations" included continued activity in Royal Bank of Scotland Group plc preferreds, as investors reacted to news out Friday regarding the commencement of dividend payouts.

Also, Ally Financial Inc. was busy but weaker following news that the U.S. Department of Treasury - which owns a majority stake in the lender - was giving its OK on a potential bankruptcy filing for Ally's troubled Residential Capital LLC unit.

RBS still active

Royal Bank of Scotland's preferreds continued to dominate trading as investors continued to react positively to news out Friday regarding the commencement of dividend payments.

Of the RBS preferreds, the most liquidly traded issues were mostly moving higher. Less-actively traded issues, however, lost a bit of ground.

The 6.4% series M noncumulative dollar preference shares (NYSE: RBSPM) gained 2 cents, closing at $17.72, while the 7.25% series T noncumulative dollar preference shares (NYSE: RBSPT) inched up 15 cents to $20.45. The 6.75% series Q noncumulative dollar preference shares (NYSE: RBSPQ) firmed by 9 cents, ending at $18.77.

Of the losing issues, the 6.35% series N noncumulative dollar preference shares (NYSE: RBSPN) slipped barely a penny to $17.595 and the 6.08% noncumulative guaranteed trust preferreds (NYSE: RBSPG) dipped 18 cents to $15.02.

On Friday, Edinburgh-based RBS said that it had repaid $265 billion back to the U.K. government. Though the company still has some funds left to pay back, the amount was enough to allow it to begin paying dividends on its preference shares once again.

Additionally, the bailout-fund payback lessened chatter of an immediate sale of the government's stake in the bank.

Still, RBS' quarterly earnings were less than stellar.

For the first quarter, net loss was wider at £1.52 billion. Revenues were down as well at £7.13 billion.

The increased loss was blamed largely on an accounting charge.

Ally preferreds slip

Word that the Treasury Department was planning to give its approval on a Residential Capital bankruptcy did not help Ally Financial's preferreds Monday.

The 8.125% fixed-to-floating rate series 2 trust preferreds (NYSE: ALLYPA) fell a dime to $24.20 and the 8.5% fixed-to-floating rate series A perpetual preferreds (NYSE: ALLYPB) lost 11 cents, closing at $22.94.

According to Bloomberg, an Obama administration official said that Ally had received conditional approval for the filing, should that be the way the parent decides to deal with its struggling offspring. The administration would require that it be allowed to view any proposed plan ahead of a filing, the report said.

Some say that putting ResCap into bankruptcy might help taxpayers recoup the bailout funds loaned to Ally much easier.

"Obviously, that's big news," a market source said. "It could be a positive. Obviously there's a risk, but it could be a huge positive."

Ally is based in Detroit.

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