Newer issues hold their ground; calendar quiets down for week; scandal pressures RBS, HSBC

By Stephanie N. Rotondo

Phoenix, Jan. 31 - After gathering a bit of upward momentum on Wednesday, the preferred stock market again turned negative on Thursday.

However, some recent new issues were treading water, as there was little in the way of price movement.

But in the secondary realm, Royal Bank of Scotland Group plc and HSBC Holdings plc were down as U.K-based banks were faced with yet another banking scandal. The scandal had to do with certain derivatives that were mis-sold to small-cap companies.

Recent issues hang in

J.P. Morgan Chase & Co.'s $850 million of 5.45% series P noncumulative perpetual preferreds were holding with a $24.75 bid, according to a trader at midday.

After the close, a market source said the issue was flat on the day at $24.75, though more than 3 million shares changing hands.

The deal priced Tuesday and freed up early Wednesday.

Saul Centers Inc.'s $125 million of 6.875% series C cumulative redeemable preferred stock - another deal that came Tuesday, though little of it has been seen since then - was meantime pegged at $24.90 bid.

Of other deals that came during the week, FirstMerit Corp.'s $200 million of 5.875% series A noncumulative perpetual preferred stock was coming in slightly, as a trader quoted the issue at $24.55 bid, $24.60 offered.

That deal came Monday and freed up Wednesday afternoon.

RBS, HSBC hurt by scandal

RBS and HSBC preferreds came under pressure as banks in the United Kingdom were again placed under a legal microscope.

The 7.25% series T noncumulative dollar preference shares (NYSE: RBSPT) fell 11 cents to $24.53, while the 6.08% noncumulative guaranteed trust preferreds (NYSE: RBSPG) declined 3 cents to $21.48.

HSBC's 8% exchangeable perpetual subordinated capital securities (NYSE: HCSPB) meantime dropped 16 cents to $27.82.

According to a report issued by the U.K. government's Financial Services Authority, the country's largest banks could be on the hook for up to £1.5 billion for mis-selling interest-rate swaps to small businesses.

The report said that of the 173 transactions investigated, nearly 90% were wrongfully sold, most of them to small businesses.

Zions' auction ends

Zions Bancorporation's previously announced auction of series G fixed-to-floating rate noncumulative perpetual preferreds wrapped up on Thursday, with pricing coming at 6.3%.

Initial talk had been 5.3% to 6.3%. As previously reported, one market source had opined the deal would come with a low-6 handle.

"It's a good credit, but there's a lot of supply out there," the source said post-pricing. "They've made a lot of improvements" but a not-so-stellar CBO portfolio "keeps pulling results down."

The Salt Lake City-based bank holding company had originally stated it would issue up to $200 million of the new securities. However, only $171.8 million were sold.

The dividend will be fixed through March 15, 2023, at which time it will begin to float at a rate equal to the fixed rate minus the mid-market 10-year swap rate.

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