Bank earnings from Wells Fargo, Citi, JPMorgan beat; GSEs active; Ashford’s deal frees up

By Stephanie N. Rotondo

Seattle, Oct. 14 – The preferred stock market was looking to rebound early Friday as bank earnings came in better than expected.

The Wells Fargo Hybrid and Preferred Securities index was up 53 basis points at mid-morning.

Wells Fargo & Co., Citigroup Inc. and J.P. Morgan Chase & Co. kicked off bank earnings season on Friday. Each of the big banks reported third-quarter results that beat estimates – even Wells Fargo, which has been dealing with the fallout of a fraudulent account scandal since early September.

But despite the pleasing results, the banks’ preferreds were not moving much.

“They beat earnings, but they took a hit obviously” on the scandal, a trader said of Wells Fargo. He opined that investors were opting to sit it out for now, because “we don’t yet know how big and how bad this is going to be.”

The trader also noted that there was chatter that Citigroup was planning to bring a preferred stock or debt deal next week. He speculated that all the banks that planned to seek more capital would start issuing next week.

As such, he said that he thought “the real movement in those issues will come next week.”

Another market source said the results showed “no real surprises.

“Although, I think some people were surprised that Wells Fargo’s results did have more of an impact from their cross-selling problem,” the source said.

Still, “It should have been obvious that it was too soon” to tell what the scandal’s impact would be.

Wells Fargo’s 6% series V class A noncumulative preferreds (NYSE: WFCPV) did trade up 4 cents to $26.05. However, that might have been due to the fact that the S&P Preferred Stock index was adding the issue to its catalog at the close of business.

GSE preferreds busy

Fannie Mae and Freddie Mac preferreds were trading actively, but a market source said there was no “material news” on the GSEs to cause the volume.

The names finished the day in mixed fashion.

The 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) fell a penny to $4.14, though the 8.25% series T noncumulative preferreds (OTCBB: FNMAT) rose a nickel, or 1.25%, to $4.05.

Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) slipped a nickel, or 1.23%, to $4.03.

Ashford frees to trade

As for the primary market, Ashford Hospitality Trust Inc.’s $150 million of 7.375% series G cumulative preferreds – a deal priced Thursday – were already trading under a temporary symbol, according to a trader.

The symbol is “AHFH.”

A second source said the issue freed to trade at noon ET.

He saw the volume weighted average price at $24.69.

Paper was pegged at $24.70 at mid-morning.

The deal came upsized from $100 million and in line with price talk.

Morgan Stanley & Co. LLC and UBS Securities LLC ran the books.

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