Fed’s stress test shows banks passing muster; preferreds firm; Hancock’s notes below par

By Stephanie N. Rotondo

Phoenix, March 5 – The preferred stock market was firm but quiet on Thursday as investors prepared for the Federal Reserve’s stress test results.

The results came out after the market closed and showed that all of the 31 big U.S. banks had passed the test, meaning each one has sufficient capital reserves to weather another financial downturn.

It was the first time since the tests began in 2009 that all of the banks met or exceeded the minimum threshold requirements.

Another trader opined that the weather in New York was keeping people away from their desks, thus the limited trading activity.

The Wells Fargo Hybrid and Preferred Securities index ended 4 basis points better. The index was up 7 bps at mid-morning.

Though the secondary was trending positively, Hancock Holding Co.’s $150 million of 5.95% $25-par notes due 2045 was not, a trader reported.

The trader saw the new deal – which came Monday and freed to trade Tuesday – at $24.55 bid, $24.65 offered.

“The manager didn’t really come in and support it,” he said.

Morgan Stanley & Co. LLC was the bookrunner.

Banks end firm

Ahead of the Fed’s release of the stress test results, the six largest U.S. banks saw their preferreds trending mostly higher on the day.

Bank of America Corp.’s 6.5% series Y noncumulative preferreds (NYSE: BACPY) gained a penny to $25.54, though its 6.625% series W noncumulative preferreds (NYSE: BACPW) fell a penny to $25.73. The Charlotte, N.C.-based bank’s results were the most all-around improved year over year.

As was largely expected, Citigroup Inc.’s results showed that the company could see a hefty equity loss in an adverse scenario, though the New York-based firm still had enough capital to meet requirements.

Citi’s 6.875% series K fixed-to-floating rate noncumulative preferreds (NYSE: CPK) ended a penny higher at $26.90.

Goldman Sachs Group Inc. was the only bank to surpass the total risked-based capital threshold, though it did so by the skin of its teeth. Its 5.5% series J fixed-to-floating rate noncumulative preferreds (NYSE: GSPJ) were seen finishing 9 cents higher at $25.09.

Though most of Morgan Stanley & Co. Inc.’s preferreds were closing stronger, the most actively traded issues were both weaker on the day – perhaps foreshadowing that certain of the company capital ratios fell to within 1% of the minimum requirements.

The 6.875% series F fixed-to-floating rate noncumulative preferreds (NYSE: MSPF) slid 4 cents to $27.17, while the 6.375% series I fixed-to-floating rate noncumulative preferreds (NYSE: MSPI) dipped a nickel to $26.34.

Rounding out the lot, Wells Fargo & Co. showed that it had 2% more than the minimum in every category.

Its 5.85% series Q fixed-to-floating rate noncumulative perpetual preferreds (NYSE: WFCPQ) rose a nickel to $26.03.

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