Preferreds lose footing late in day; HSBC discloses expected money-laundering costs, declines

By Stephanie N. Rotondo

Phoenix, July 30 - The preferred market was "trickling up a little bit higher," a trader reported at midday on Monday.

However, things were generally muted ahead of the end of the month. Investors were either slowly reshuffling positions or simply sitting back and waiting.

And there is a lot to wait for, a trader remarked.

In addition to the ongoing European saga, the Federal Reserve is set to meet later this week to discuss whether or not Quantitative Easing 3 will be necessary. Employment numbers are also going to be released during the week.

Meanwhile, there was "no word of any new deals yet," the trader said. Last week, there were also no deals announced Monday, but the new issue calendar was jam-packed regardless.

But while the market was generally higher in early dealings, by late afternoon, things had turned negative, according to a market source.

"Somewhere around 1 [p.m. ET], it just started sliding," the source said. "I'm not sure what sparked that. Nobody seems to know."

In the news, HSBC Holdings plc said it was setting aside $2 billion to cover potential costs related to money-laundering charges. That news, combined with a lower half-year net profit, pushed the bank's preferreds lower.

HSBC falls on charges

HSBC Holdings' 8% exchangeable perpetual subordinated capital securities (NYSE: HCSPB) fell 28 cents, or 1.01%, to $27.57 after the company disclosed the $2 billion it set aside due to money-laundering charges in the United States and the United Kingdom.

HSBC apologized to its investors Monday as it disclosed the charges and said that it intended to learn from its mistakes.

In addition to reporting the charges, the company also said that its half-year net profit had fallen 8.4% to $8.4 billion due to a larger tax bill.

Still, pretax profit was up 11% at $12.7 billion, due in large part to $4.3 billion of gains from asset sales.

Though the company discussed the money laundering, it did not address the Libor scandal that it has also recently been faced with.

Recent deals tidbits

In recent deals, CommonWealth REIT's $175 million of 5.75% senior notes due 2042 officially listed on the New York Stock Exchange Monday.

The ticker symbol is "CWHO." The deal priced July 20.

Paper was trading at $24.68, down from opening levels of $24.70.

Also, BB&T Corp.'s new $1 billion issue of 5.625% series E noncumulative perpetual preferred stock was seen trading at $25.25, while Dynex Capital Inc.'s $50 million of 8.5% series A cumulative redeemable preferreds were pegged at par.

BB&T's deal priced Tuesday, while Dynex's issue came Wednesday.

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