Preferreds rise as Morgan Stanley beats; Banc of California eyed; recent deals set to list

By Stephanie N. Rotondo

Seattle, Oct. 19 – Preferred stocks continued to gain momentum on Wednesday as yet another big bank’s earnings beat expectations.

“There are decent bank earnings still, especially on the broker-dealer side,” a market source said.

Morgan Stanley & Co. Inc.’s third-quarter earnings per share came in at 81 cents on revenue of $8.9 billion. Analysts polled by Thomson Reuters had forecast EPS of 63 cents on revenue of $8.17 billion.

The Wells Fargo Hybrid and Preferred Securities index ended up 10 basis points. However, the index was up 33 bps at mid-morning.

As for the intraday slide, a source noted that there was a “risk-on trade early in the day” that probably resulted in the larger gains in the morning. But after that, “risk tolerance kind of came off.”

The source added that the downward turn came about the same time that long Treasuries started to rebound.

Banc of California Inc.’s 7% series E noncumulative perpetual preferreds (NYSE: BANCPE) were meantime also firming in the wake of the Irvine, Calif.-based bank’s results.

The bank also issued a statement in regards to a Seeking Alpha report that alleged the company was connected to a known conman, Jason Galanis. The bank said it launched an internal investigation to see if claims Galanis was connected to anyone in management were true, though it also cited a May 9 complaint filed by the Department of Justice that stated Galanis’ affiliation claims were “fraudulent.”

And while one source agreed that the claims would likely prove to be false, he remained concerned about a potential conflict of interest between the bank’s chief executive officer and his brother in regards to the naming rights of a new soccer stadium in Los Angeles – a deal that the bank paid $100 million for.

Meanwhile, a market source told Prospect News on Wednesday that two recent deals – PS Business Parks Inc.’s $165 million of 5.2% series W cumulative preferred shares and Ashford Hospitality Trust Inc.’s $150 million of 7.375% series G cumulative preferred stock – will list on the New York Stock Exchange on Friday.

PS Business, which came Oct. 11, will trade under “PSBPW,” while Ashford, which priced Oct. 13, will list under “AHTPG.”

For its part, PS Business traded up 2 cents to $24.90. Ashford declined 10 cents to $24.80.

Banc of California firms

Banc of California’s 7% series E preferreds were pushing higher on Wednesday after the company released its latest quarterly results.

The preferreds were up $1.23, or 5.21%, at $24.85.

For the third quarter, the bank posted EPS of 59 cents, which compared to 29 cents the year before. Analysts had expected EPS of 42 cents.

Revenue was $161.6 million, up from $106.3 million. Analysts’ mean estimate was $143 million.

One market source who listened to the bank’s conference call said that it opened with a statement from the company’s general counsel regarding allegations from an anonymous short seller that said the bank’s management and board of directors had ties to Galanis, a convicted scam artist.

The counsel noted that once the company learned of the claims, it launched an independent investigation, led by law firm Winston & Strawn. The investigation has been going on for a year but has not yet turned up any evidence of ties between Galanis and the bank.

The source also said that in Galanis’ indictment, there is no specific mention of Steven Sugarman, CEO, or the bank itself. However, the indictment also sheltered specific names, deeming them “Institution A” and “Institution B,” and so on. Banc of California went to the FBI and asked if any of those vague names were about them and was told they were not.

Galanis has claimed that he has done work with Sugarman’s brother, as well as a former board member of one of Sugarman’s holding companies.

The trickier issue, according to a source, is the bank’s $100 million deal to name a major league soccer stadium on Los Angeles. There have been concerns raised that there is a conflict of interest between Sugarman and his brother on the deal.

“I think there is going to be more than just smoke around this stadium rights issue,” the source said.

The source also commented that the bank’s investigation could turn up something.

“Investigations like that can be a role of the dice,” he said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.