Preferreds stay firm; Wells Fargo, Bank of America improve post-earnings; Targa softens

By Stephanie N. Rotondo

Phoenix, Oct. 14 – Preferred stocks were modestly higher for most of Wednesday trading but came in a touch in the final minutes of the day.

The earlier gains were due in part to a round of good bank earnings.

The Wells Fargo Hybrid and Preferred Securities index closed down 2 basis points after being up 4 bps at mid-morning.

Wells Fargo & Co. and Bank of America Corp. put out third-quarter results early in the day. Both saw an increase in profits, which helped their preferreds gain momentum.

Wells Fargo’s 6% series V class A noncumulative preferreds (NYSE: WFCPV) closed up 5 cents at $25.73, as the 5.85% series Q fixed-to-floating rate noncumulative perpetual preferreds (NYSE: WFCPQ) rose 2 cents to $25.62. BofA’s 6.5% series Y noncumulative preferreds (NYSE: BACPY) were 15 cents higher at $25.68.

For Wells Fargo, a 7.7% increase in loan growth resulted in a net profit of $5.8 billion, or $1.05 per share. Revenue rose to $21.88 billion from $21.21 billion.

Analysts polled by Thomson Reuters had predicted earnings per share of $1.04 on revenue of $21.76 billion.

As for BofA, it posted a profit of $4.5 billion, which compared to a loss of $232 million the year before. Earnings per share were 37 cents, better than the 33 cents analysts had been expecting.

However, the bank did see revenues fall 2.4% to $20.9 billion.

The earnings from Wells Fargo and BofA follow JPMorgan Chase & Co.’s own quarterly release on Tuesday. For the quarter, JPMorgan posted adjusted earnings per share of $1.32 on revenue of $23.54 billion.

Revenue was off 6% year over year, and the figures missed expectations of $1.37 per share on revenue of $23.69 billion, according to analysts polled by Thomson Reuters.

On a non-adjusted basis, net profit was up over 20%.

Though JPMorgan missed expectations, its preferreds were also moving up in midweek trading.

The 6.1% series AA noncumulative preferreds (NYSE: JPMPG) improved 2 cents to $25.25, as the 6.15% series BB noncumulative preferreds (NYSE: JPMPH) inched up a penny to $25.40.

Targa greenshoe exercised

The greenshoe on Targa Resources Partners LP’s offering of 9% fixed-to-floating rate cumulative redeemable preferred units was partially exercised on Wednesday, a market source reported.

An additional $15 million of the units was sold. Added to the $110 million initially sold on Oct. 7, total issuance comes to $125 million.

The over-allotment options allowed for up to $16.5 million additional units to be sold.

The units are trading under a temporary symbol “TGARP.”

Paper ended at $24.91, off 2 cents on the day. Earlier in the session, a trader had quoted the issue at $24.95 bid, par offered.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, UBS Securities LLC and Wells Fargo Securities LLC were the joint bookrunners.

Houston-based Targa Resources Partners provides midstream natural gas and natural gas liquids services.

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