Morning Commentary: Citigroup softens on weak earnings; Full Circle prices add-on to notes

By Stephanie N. Rotondo

Phoenix, July 14 – Citigroup Inc.’s preferreds were mostly weaker Monday after the company reported a hefty decline in profit due to a $7 billion settlement with the Justice Department.

The 7.875% fixed-to-floating rate trust preferred securities (NYSE: CPN) were off 1.282 cents to $27.707 in early trading. The 6.875% series L noncumulative preferreds (NYSE: CPL), however, were managing to tick up 4 cents to $25.99.

The New York-based bank announced early Monday that it had reached a settlement with the federal government in regards to allegations the firm sold faulty mortgage securities ahead of the financial crisis. In making the settlement, Citigroup booked a $3.8 billion pre-tax charge on its second-quarter results, leaving its quarterly income at $181 million, or 3 cents per share – a 96% decline year over year.

However, excluding the charge, income would have been $1.24 per share, which beat analysts’ estimates of $1.05 per share.

Revenues dropped 5.6% to $19.34 billion. That also beat estimates, which were around $18.93 billion.

Elsewhere, Full Circle Capital Corp. said it had priced a $12.5 million add-on to its 8.25% $25-par notes due 2020 (Nasdaq: FULLL).

The notes were sold at $25.375, a 2.8% discount to Friday’s closing price of $26.08.

Come Monday, the notes were trading down at mid-morning, losing 18 cents to $25.90.

The Rye Brook, N.Y.-based closed-end investment company originally sold $21.1 million of the notes in June 2013.

Proceeds will be used to pay down debt.

A trader said he had not heard of any new deals being launched Monday, but noted that “we had heard that we will have a busier calendar this week.”

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