Morning Commentary: Bank earnings from Wells Fargo, Citi, JPMorgan beat; Ashford gets a ticker

By Stephanie N. Rotondo

Seattle, Oct. 14 – The preferred stock market was looking to rebound early Friday, as bank earnings came in better than expected.

The Wells Fargo Hybrid and Preferred Securities index was up 53 basis points at mid-morning.

Wells Fargo & Co., Citigroup Inc. and J.P. Morgan Chase & Co. kicked off bank earnings season on Friday. Each of the big banks reported third-quarter results that beat estimates – even Wells Fargo, which has been dealing with the fallout of a fraudulent account scandal since early September.

But despite the pleasing results, the banks’ preferreds were not moving much.

“They beat earnings, but they took a hit obviously” on the scandal, a trader said of Wells Fargo. He opined that investors were opting to sit it out for now, because “we don’t yet know how big and how bad this is going to be.”

The trader also noted that there was chatter that Citigroup was planning to bring a preferred stock or debt deal next week. He speculated that all the banks that planned to seek more capital would start issuing next week.

As such, he said that he thought “the real movement in those issues will come next week.”

As for the primary market, Ashford Hospitality Trust Inc.’s $150 million of 7.375% series G cumulative preferreds – a deal priced Thursday – were already trading under a temporary symbol, according to a trader.

The symbol is “AHFH.”

Paper was pegged at $24.70 at mid-morning.

The deal came upsized from $100 million and in line with price talk.

Morgan Stanley & Co. LLC and UBS Securities LLC ran the books.

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