Preferreds up amid economic data; RAIT covered by JMP; RBS to be fined for mortgage advice

By Stephanie N. Rotondo

Phoenix, Aug. 26 – Preferred stocks were again strong on Tuesday, helped by a fresh round of improving economic data.

The Wells Fargo Hybrid and Preferred Securities index was up 11 basis points.

A trader said that the latest durable goods numbers were “really good,” causing him to expect a sell-off in Treasuries. Instead, he said, the bonds had been gyrating between positive and negative territory.

As such, “it’s just quiet right now,” he said early in the session.

JMP Securities initiated coverage on RAIT Financial Trust on Tuesday.

“That’s probably why [the 7.125% $25-par senior notes due 2019] were up yesterday,” a trader said.

Come Tuesday, the notes (NYSE: RFTA) were coming in a little.

One trade quoted the issue at $24.97 bid, par offered. According to the NYSE, paper was trading at $24.95, down 8 cents from the previous close but unchanged from opening levels.

The notes hit an intraday low of $24.91.

The $70 million deal priced Aug. 11 via Deutsche Bank Securities Inc., Barclays, Keefe Bruyette & Woods and Credit Suisse Securities (USA) LLC.

RBS mixed as fine looms

Royal Bank of Scotland Group plc was mixed in Tuesday trading as it was reported that the Edinburgh-based bank would likely be slapped with a large fine for giving faulty advice on mortgages.

RBS’ preferreds were also quite active in an otherwise muted day.

The 5.9% noncumulative guaranteed trust preferred securities (NYSE: RBSPE) ended down 3 cents at $24.00. The 6.35% series N noncumulative dollar preference shares (NYSE: RBSPN) meantime gained 2 cents to close at $24.84.

Bloomberg reported Tuesday that RBS was set to be slapped with a fine of as much as £15 million – or nearly $25 million – from the Financial Conduct Authority for giving bad advice regarding mortgages.

The fine could be levied as soon as Wednesday.

The latest penalty facing the 80% government-owned bank is not the last; the company is expected to get another fine for computer failures that left thousands of customers without access to their accounts, as well as one for wrongfully selling customers insurance products.

The bank has put aside funds to deal with the various regulatory issues it faces, but they are adding up. The looming mortgage penalty is believed to have little impact on the bottom line, but it is certainly just one more obstacle the company faces as it looks to shake off its government owners.

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