Citigroup softens on earnings, settlement; Wells Fargo sells 6% noncumulative preferreds

By Stephanie N. Rotondo

Phoenix, July 14 – Citigroup Inc.’s preferreds were weaker Monday after the company reported a hefty decline in profit due to a $7 billion settlement with the Justice Department.

The 6.875% series L noncumulative preferreds (NYSE: CPL) slipped 7 cents to $25.88, though the shares were managing to tick up slightly in early trading, beating the overall trend of the structure.

The 6.875% series K fixed-to-floating rate noncumulative preferreds (NYSE: CPK) traded down 8 cents to $27.02.

The New York-based bank announced early Monday that it had reached a settlement with the federal government in regards to allegations the firm sold faulty mortgage securities ahead of the financial crisis. In making the settlement, Citigroup booked a $3.8 billion pre-tax charge on its second-quarter results, leaving its quarterly income at $181 million, or 3 cents per share – a 96% decline year over year.

However, excluding the charge, income would have been $1.24 per share, which beat analysts’ estimates of $1.05 per share.

Revenues dropped 5.6% to $19.34 billion. That also beat estimates, which were around $18.93 billion.

Wells Fargo & Co. brought a $700 million issue of 6% series T class A noncumulative perpetual preferred stock on Monday.

The deal was upsized from $250 million and came at the tight end of 6% to 6.125% talk.

A source pegged the preferreds at $24.77 bid, $24.82 offered.

Another trader quoted the preferreds at $24.75 bid, $24.82 offered.

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