Morning Commentary: Preferreds mostly flat as bank earnings eyed; Wells Fargo, Citigroup firm

By Stephanie N. Rotondo

Seattle, April 12 – Preferred stocks were flat to a touch weaker early Wednesday, with investors gearing up for the start of bank earnings season.

The Wells Fargo Hybrid and Preferred Securities index was down 3 basis points at mid-morning. The U.S. iShares Preferred Stock ETF was flat.

Wells Fargo & Co., J.P. Morgan Chase & Co. and Citigroup Inc. are all slated to announce earnings on Thursday. Ahead of that, the banks’ preferreds were trending higher.

Wells Fargo’s 5.5% series X class A noncumulative preferreds (NYSE: WFCPrX) were up a nickel in early dealings, trading at $24.9279. Citigroup’s 7.125% series J fixed-to-floating rate noncumulative preferreds (NYSE: CPrJ) were similarly better at $28.95.

While there wasn’t yet much activity in the JPMorgan structure, the preferreds were still trading mostly better.

Wall Street is expecting first-quarter results to be fairly positive, boosted in part by net interest margins and fixed-income trading.

However, the market will also be looking at potential negatives, such as loan growth – particularly in the auto loan space.

For the quarter, Wells Fargo is expected to report earnings per share of 97 cents on revenue of $22.31 billion. On the EPS side, that would be down 2% year over year but up 0.5% on the revenue side.

Citigroup is meantime forecasted to show EPS of $1.23, a 12% gain year over year. Revenue is expected to inch up 1% to $17.76 billion.

And, JPMorgan is expected to post EPS of $1.52 on revenue of $24.87 billion.

That represents a 13% and 3% gain, respectively.

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