Citigroup rises as profit beats estimates; Goldman preferreds up; Webster Financial pops

By Stephanie N. Rotondo

Phoenix, July 16 – The preferred stock market surged Thursday in what one market source called “post-Greece euphoria.”

“It seems like Greece is fixed and it seems like China is back on the right path,” a trader said, adding that given the state of things, “seems like we’ll definitely see a rate hike in September.”

The Wells Fargo Hybrid and Preferred Securities index finished 42 basis points higher. It was up 22 bps at mid-morning.

Trading volume was also improving, according to a source.

“It was probably the best liquidity we’ve had in weeks,” he said. “But it wasn’t gangbusters either.”

Meanwhile, “banks had great earnings,” a trader said. “So those preferreds are holding their own.”

Citigroup Inc. released its numbers on Thursday, as did Goldman Sachs Group Inc. For its part, Citi posted its highest earnings in eight years, boosted by cost-cutting and restructuring efforts and declining legal costs.

Goldman meantime saw its profit plunge 52%.

Citi beats estimates

The second quarter was a good one for Citigroup, as earnings posted Thursday greatly beat expectations.

In response, the New York-based bank’s preferreds were heading higher.

The 6.875% series K fixed-to-floating rate noncumulative preferreds (NYSE: CPK) ended the day up 20 cents at $26.95. Earlier in the day, the preferreds were up 17 cents, trading at $26.92.

For the quarter ended June 30, Citi’s net income rose to $4.85 billion, or $1.51 per share, from $181 million, or 3 cents per share, the year before.

The previous year’s results included a charge of $3.8 billion due to legal costs.

On an adjusted basis, net income was up 18% year over year at $4.65 billion, or $1.45 per share.

Revenue came to $19.5 billion, up from $19.38 billion.

Analysts polled by Thomson Reuters had predicted earnings per share of $1.34 on revenue of $19.11 billion.

The massive increase in the bottom line was attributed in part to cost-cutting and restructuring efforts. Operating expenses fell to $360 million from $402 million. Adjusted expenses dropped 7% to $10.93 billion.

Citi did see a small decline in fixed-income trading revenue, though not nearly as much as some of the other big banks that have already reported.

Revenue from that segment was off 1% at $3.06 billion.

Goldman profit plunges

Goldman Sachs also released earnings on Thursday. Like Citi its preferreds were gaining ground.

The 6.375% series K fixed-to-floating rate noncumulative preferreds (NYSE: GSPK) closed at $26.42, up a dime. The 5.5% series J fixed-to-floating rate noncumulative preferreds (NYSE: GSPJ) improved 24 cents – nearly 1% – to $24.85.

The New York-based investment bank reported its smallest quarterly profit in almost four years on Thursday, due in large part to $1.45 billion that was set aside to cover legal costs.

For the quarter, Goldman saw a profit of $1.05 billion, or $1.98 per share. That compared to income of $2.04 billion, or $4.10 per share, the year before.

Revenue dropped to $9.07 billion.

Analysts polled by Thomson Reuters had forecast earnings per share of $3.89 on revenue of $8.78 billion.

Fixed-income trading revenue meantime declined 28% to $1.6 billion.

Webster rises post-numbers

Though not a “big bank,” Webster Financial Corp. was another financial institution that came out with numbers on Thursday.

The Waterbury, Conn.-based bank saw a record profit, giving its 6.4% series E noncumulative perpetual preferreds (NYSE: WBSPE) a boost.

The preferreds rose 28 cents to $25.34.

For the quarter, net income was $50.5 million, or 55 cents per share. In the previous year, net income was $45.2 million, or 50 cents per share.

Webster’s overall loan portfolio increased 11.3% to $1.5 billion. Deposits improved 13.8%.

Morgan Stanley on tap

Morgan Stanley & Co. Inc. is slated to bring its earnings on Monday. Its preferreds have been inching up ahead of the reveal.

In Thursday trading, the 6.375% series I fixed-to-floating rate noncumulative preferreds (NYSE: MSPI) gained a penny to $25.66. Over 732,000 shares were exchanged, making the issue the day’s most active among listed and paying securities.

Morgan Stanley earnings are expected to increase year over year. According to Zacks Investments, analysts are forecasting earnings per share of 73 cents, up from 60 cents a year ago.

DynaGas gets symbol

DynaGas LNG Partners LP’s $75 million of 9% series A cumulative redeemable preferred units – a deal from Monday – was assigned a temporary trading symbol, according to a trader.

The temporary ticker is “DYNGF.”

Paper closed at $24.60, up 2 cents.

A trader quoted the recently priced issue at $24.50 bid, $24.55 offered earlier in the session, noting that investors might be shying away from the name given weakening oil prices.

Morgan Stanley & Co. LLC was the lead on the deal. Other joint bookrunners included Credit Suisse Securities (USA) Inc., Stifel Nicolaus & Co. and DNB Markets.

Price talk was 9% to 9.125% on the non-rated deal, which came upsized from $50 million.

Proceeds will be used with borrowings under a new secured debt facility to finance the purchase price of an optional vessel acquisition. Should that acquisition fail, the funds will be used for general partnership purposes, including working capital.

DynaGas is a Monaco-based growth-oriented limited partnership focused on owning and operating LNG carriers.

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