Preferred stocks rebound in muted midweek trading; Volkswagen ADRs stage rally, CEO quits

By Stephanie N. Rotondo

Phoenix, Sept. 23 – Preferred stocks rebounded with gusto Wednesday after selling off a touch on Tuesday.

The Wells Fargo Hybrid and Preferred Securities index ended 23 basis points higher. The index closed Tuesday’s session down 2 bps, though it was off as much as 7 bps prior to the close.

But while the market was showing signs of strength, the Yom Kippur holiday was weighing on activity, as some market players were absent.

“There’s nothing happening,” a trader said.

The trader did note that Volkswagen AG’s euro-denominated preferreds had been “getting hammered” in the wake of the company’s scandal involving auto emissions. It was reported last week that the German automaker had installed software into its diesel cars that effectively misconstrued emissions reports.

The company’s board of directors met Wednesday with Martin Winterkorn, chief executive officer, to decide the executive’s fate. Winterkorn reportedly agreed to resign, taking full responsibility for the scandal but denying any personal wrong-doing.

A full board meeting to discuss a replacement for Winterkorn is slated for Friday.

Volkswagen does have an issue of American Depositary Shares linked to its preference shares that trade over-the-counter. That issue (OTCBB: VLKPY) dropped more than 19% in Tuesday trading but was also rebounding on Wednesday.

The shares closed up $1.52, or 6.36%, at $25.50. Over 1 million of the shares were traded versus the average daily volume of about 125,000 shares.

Recent deals remain active

While liquidity was a bit on the muted side, investors continued to zero in on recent deals from Wells Fargo & Co. and Qwest Corp.

Wells Fargo’s $900 million of 6% series V class A noncumulative preferreds (NYSE: WFCPV) traded up 6 cents to $25.14, while Qwest’s $400 million of 6.625% $25-par notes due 2055 (NYSE: CTZ) rose a nickel to $24.88.

The Wells Fargo issue priced Sept. 8, and Qwest followed on Sept. 10.

RBS dips, National Bank gains

It was reported Wednesday that Royal Bank of Scotland Group plc was cutting 100 jobs from its investment banking unit. The cuts were not much of a shock as the Edinburgh, Scotland-based bank said in May that it would be laying off employees and restructuring departments to cut costs and turn itself around.

Still, the 6.08% noncumulative guaranteed trust preferred securities (NYSE: RBSPG) traded down 4 cents to $24.89.

National Bank of Greece SA’s $2.25 series A noncumulative preference shares (NYSE: NBGPA) meantime continued to move upward, as the country looks to reform itself.

In particular, the nation is looking to reform its banking system in order to deal with a capital shortfall. Based on Greece’s bailout agreement with the European Central Bank, it has until January to begin implementing reforms.

The National Bank preferreds rose $1.61, or 20.77%, to $9.36.

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