Preferreds firm as bank earnings announced; Wells Fargo ticks up; Two Harbors trades well

By Stephanie N. Rotondo

Seattle, July 14 – The preferred stock market was trending upward on Friday as bank earnings season kicked off.

Reporting banks – including J.P. Morgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. – all reported better-than-expected profits, though revenues were on the weaker side.

The Wells Fargo Hybrid and Preferred Securities index ended 17 basis points higher on the day. The U.S. iShares Preferred Stock ETF firmed 15 bps.

While bank earnings did beat expectations – mostly – there wasn’t much reaction in bank-linked preferreds.

The 8% class A series J noncumulative preferreds (NYSE: WFCPrJ) were the most active of the bank’s preferred issues, rising 3 cents to $25.90. The 5.625% class A series Y noncumulative preferreds (WFCPrY) were a little less active, but still better, adding 9 cents to close at $26.24.

For the second quarter, the San Francisco-based bank reported net income of $5.4 billion, or $1.07 per share. That was a 4.5% increase year over year.

Analysts polled by Thomson Reuters had forecast EPS of $1.01.

Of the week’s new issues, Two Harbors Investment Corp.’s $250 million of 7.625% series B fixed-to-floating rate cumulative redeemable preferreds were getting the most attention, as the paper continued to climb over par.

One market source said the paper finished 11 cents higher at $25.338. But another source saw the issue gaining even more, rising 13 cents to $25.38.

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