Morning Commentary: Bank preferreds move up after stress test; Gabelli, National General improve

By Christine Van Dusen

Atlanta, July 1 – Trading of preferred stocks from U.S. banks was quiet on Friday morning ahead of the Independence Day holiday in the United States on Monday, with some upward movement for banks in the wake of the most recent round of stress tests.

Wells Fargo & Co.’s 5.5% series X class A noncumulative preferreds (NYSE: WFCPX) traded Friday morning up 14 cents to $25.92.

Bank of America Corp.’s 6% series EE noncumulative preferreds (NYSE: BACPA) moved up 14 cents to $26.18 on Friday morning. And JPMorgan Chase & Co.’s 6.15% series BB noncumulative preferreds (NYSE: JPMPH) rose 8 cents to $26.83.

Last week, the Fed said that all of the 33 banks that were tested passed the stress review. The first round looks at a firm’s capital reserves and how it will fare if there's another financial crisis.

Wednesday saw the release of the second round results, which take into account a bank’s capital plan. Deutsche Bank Trust, Santander Holdings USA and Morgan Stanley were flagged.

Also on Friday, New York-based investment firm Gabelli Dividend & Income Trust’s $100 million of 5.25% series G cumulative preferreds – a deal priced Tuesday – moved to about $25.20 in trading, a trader said.

Morgan Stanley and Wells Fargo Securities LLC were the joint bookrunners. G. research LLC was the co-manager.

Proceeds will be used to purchase portfolio securities in accordance with the fund’s investment objective and policies.

In other news, investors continued to watch National General Holdings Corp. after the New York-based insurance company sold $175 million of series C noncumulative preferreds at par to yield 7.5%, following price talk at 7.625%.

A trader quoted the new issue at about $25.10 on Friday morning.

Morgan Stanley & Co. LLC, UBS Securities LLC and Keefe Bruyette & Woods Inc. ran the books for the deal, the proceeds of which will be used for general corporate purposes.

On Friday morning, the company’s 7.5% series B noncumulative preferreds (Nasdaq: NGHCO) were trading at $25.51, up 5 cents. The 7.625% $25-par subordinated notes due 2055 (Nasdaq: NGHCZ) were seen at $25.35, also up a nickel.

“It’s going to be really quiet today,” the trader said.

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