Wells Fargo, Citigroup rise ahead of bank earnings; CorEnergy prices add-on at par

By Stephanie N. Rotondo

Seattle, April 12 – Preferred stocks were flat to a touch weaker early Wednesday but managed to finish the session with a slightly firmer feel.

The gyrations came as the market prepared for bank earnings season to kick off on Thursday.

The Wells Fargo Hybrid and Preferred Securities index closed up 8 basis points, though it was down 3 bps at mid-morning. The U.S. iShares Preferred Stock ETF ticked up 1 bp after being flat earlier in the day.

Though there was some strength in the preferred space, liquidity was the lowest it has been all week. Trading volumes have suffered of late but were further pressured this week by the fact that it was a holiday week.

Growing geopolitical concerns surrounding Syria and North Korea were also not helping matters.

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 8 cents at the bell, closing at $24.96. Citigroup’s 7.125% series J fixed-to-floating rate noncumulative preferreds (NYSE: CPrJ) were 14 cents better at $29.04.

Citi’s 7.875% fixed-to-floating rate trust preferred securities (NYSE: CPrN) meantime ended unchanged at $26.66.

While there wasn’t 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.

CorEnergy drops on add-on

CorEnergy Infrastructure Trust Inc.’s 7.375% series A cumulative redeemable preferred stock (NYSE: CORRPrA) easily topped trading in the midweek session, with over 2 million of the preferreds trading.

The activity in the name came after the company said it had priced a $70 million add-on at par via a bought-deal private placement.

In the wake of the offering, the preferreds tumbled 56 cents, or 2.21%, to $24.79.

The deal was upsized from an expected $50 million. A $10.5 million greenshoe was also increased, from $7.5 million.

Wells Fargo Securities LLC and Stifel Nicolaus & Co. Inc. ran the books.

Prior to the add-on pricing, there was $56.25 million of the preferreds outstanding.

Proceeds will be used to repay debt under a credit facility and/or for general corporate purposes.

CorEnergy is a Kansas City, Mo.-based company that primarily owns midstream and downstream U.S. energy infrastructure assets subject to long-term triple net participating leases with energy companies.

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