Morning Commentary: Bank earnings kick off with JPMorgan, Wells Fargo; Colony set to list on NYSE

By Stephanie N. Rotondo

Phoenix, April 14 – The preferred stock market was firm as Tuesday trading got underway and as investors reacted to the kick-off to bank earnings season.

The Wells Fargo Hybrid and Preferred Securities index was up 6 basis points at mid-morning.

JPMorgan Chase & Co. and Wells Fargo & Co. released their latest quarterly results ahead of the market’s open. For JPMorgan, the results showed improved year-over-year profit that even beat expectations.

Wells Fargo, however, reported a surprising decline in profit.

Still, both banks’ preferreds were trending toward the up side, though the most actively traded issues were weaker.

JPMorgan’s 6.125% series Y noncumulative preferreds (NYSE: JPMPF) were off 4 cents at $25.79 in early trading. Wells’ 8% class A series J noncumulative preferreds (NYSE: WFCPJ) were down a penny at $29.06.

For its part, JPMorgan was also reported to be shopping a benchmark-sized $1,000-par preferred offering. The preferreds will be fixed-to-floating rate, with initial price talk at 5.5%.

“5.5% on a $1,000-par – that’s cheap money,” a trader said. If that deal does well, Wells Fargo – still considered to be a stronger bank than JPMorgan – could come with a deal below that level, the trader speculated.

Away from banks and earnings, Teekay Offshore Partners LP’s new $125 million issue of 8.5% series B cumulative redeemable preferred units were quoted at $24.65 bid, $24.70 offered.

The deal priced Monday, coming upsized from $75 million and at the tight end of talk.

Elsewhere in the recently priced space, Colony Capital Inc.’s 7.125% series C cumulative redeemable preferreds are slated to list on the New York Stock Exchange on Wednesday.

The $250 million deal priced April 8. On Monday, the company said its greenshoe had been fully exercised, lifting issuance to $287.5 million.

The preferreds will be listed under the symbol “CLNYPC.”

A trader saw the issue at $24.95 in morning trading. However, another source placed the issue at $24.90, unchanged from Monday’s close but down from opening levels of $24.95.

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