Bank earnings, Europe news boost preferreds; Goldman, Bank of America end higher; PNC active

By Stephanie N. Rotondo

Portland, Ore., Oct. 18 - Preferred stocks moved higher Tuesday, helped in part by "more positive news in Europe," a trader said.

"The market was down on Goldman Sachs [Group, Inc. earnings] in the morning and then rallied back significantly in the afternoon," he said.

Another market source agreed that it was "an up day," though he added "possibly without good reason. It depends on your view of things."

Late in the afternoon, he said, the U.K.-based newspaper The Guardian posted a story indicating that France and Germany were ready to agree on a €2 trillion bailout fund for the euro zone. The source said the news "did send the market up," though he remained skeptical.

"It's whether we believe they are going to do something concrete at this point," another trader said.

"We're range bound until we see some clarity from Europe or banks here that are dealing with mortgage exposure," a trader said.

In addition to Goldman Sachs, Bank of America Corp. also reported quarterly numbers. Traders called the report mixed despite the bank posting a $6.2 billion profit.

Both Goldman Sachs and Bank of America preferreds traded up on the day.

Meanwhile, trust preferreds issued by PNC Financial Services Group Inc.'s National City Capital Trust II continued to trade actively, though unchanged on the day. The paper saw high turnover on Monday in response to word of an upcoming redemption.

Citigroup Inc. preferreds were trading busily and higher.

Goldman, BofA report

Goldman Sachs and Bank of America reported quarterly earnings Tuesday, and though traders deemed the numbers largely mixed, the preferreds gained ground anyway.

Bank of America's 8.2% series H depositary shares (NYSE: BACPH) rose 37 cents, or 1.66%, to $22.72. Goldman Sachs' 6.125% $25-par notes due 2060 (NYSE: GSF) meantime inched up 7 cents to $24.86.

"None of them were really good," a market source said of the earnings, calling Goldman Sachs' performance "ugly."

For Bank of America, a trader said the quarterly report was mixed "because of all the different one-time items. It looks like their exposure to the mortgage lawsuits was decreasing faster than anyone expected."

Goldman Sachs reported a third-quarter loss of $393 million, or 84 cents per share, despite a 16% increase in trading revenues.

Goldman Sachs had posted net income of $1.9 billion the year before.

Revenues for the third quarter fell 60% to $3.59 billion from $8.9 billion in 2010. Book value dropped to $131.09 per share from $131.44 for the second quarter of 2011.

Meanwhile, Bank of America reported a $6.2 billion profit for the quarter. Its assets fell to $2.21 trillion, resulting in the bank losing its No. 1 position.

The profit was due to accounting gains of $4.5 billion and $1.7 billion related to the decreasing value of its debt.

Additionally, the $3.6 billion sale of its stake in China Construction Bank helped the bottom line.

Goldman repack doing well

Among other Goldman Sachs securities, a trader said the company's recent bond "repack" - a $25 million issue of 6.75% callable class A trust certificates due 2037 that priced on Sept. 30 - was trading at $24.90.

"That's pretty good," he said, noting that the few trades in the issue were "as-of" trades. "It will be interesting to see how these things work."

PNC TRUPs active again

Late in the day Friday, PNC Financial Services announced a call for $750 million of 6.625% trust preferreds issued by National City Capital Trust II.

Come Monday, the news resulted in high trading volume and higher value for the trust preferreds.

The trust preferreds (NYSE: NCCPA) continued to trade actively on Tuesday, with nearly 1.65 million of them changing hands. However, they closed unchanged at $25.38.

The trust preferreds were originally scheduled to come due Nov. 15, 2036 but instead will be redeemed at par on Nov. 15.

The redemption is part of a capital plan approved by the Federal Reserve and will be funded with available cash.

Pittsburgh-based PNC is scheduled to report earnings on Wednesday.

Buyers like Citigroup

A trader said there was "buy interest in Citi" preferreds.

It was no surprise, then, that Citi's preferred issues were among the day's most actively traded securities.

The 8.5% fixed-to-floating-rate trust preferreds (NYSE: CPJ) saw volume of over 1 million trust preferreds, gaining 15 cents to $25.15. The 6.95% trust preferred capital securities (NYSE: CPZ) traded up 55 cents, or 2.42%, to $23.26 on volume of about 731,000 trust preferreds.

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