Preferreds from Citi, Wells Fargo, Bank of America move up; investors wonder about rate hike

By Christine Van Dusen

Atlanta, Oct. 15 – Banks were in the spotlight on Thursday as Citigroup Inc. was the latest to release third-quarter earnings, this time reporting that the financial services company beat expectations with a 50% increase in profit.

In response, Citigroup Capital XIII's 7 7/8% fixed-to-floating-rate trust preferred securities closed on Thursday at $25.95, up three cents, after trading at a high of $26.00 and a low of $25.93.

"We expected there might be some possible new issues out of banks, because of earnings, but they haven't announced that and probably won't for the rest of the week," a trader said. "I think maybe it's the mixed economic news, with the focus on whether there will be a rate hike this year and the debt hangover."

Other banks recently released earnings, including Wells Fargo & Co., which reported an increase in profits and saw its 6% series V class A noncumulative preferreds (NYSE: WFCPV) finish Thursday morning at $25.76, up three cents, after trading at a high of $25.80 and a low of $25.67.

The bank's 5.85% series Q fixed-to-floating-rate noncumulative perpetual preferreds (NYSE: WFCPQ) ended Thursday at $25.63, up a penny. The preferreds traded as high as $25.73 and as low as $25.58.

Bank of America Corp. also reported on Wednesday an increase in profits and saw its 6.5% series Y noncumulative preferreds (NYSE: BACPY) move to $25.90, up 22 cents from Wednesday. That was the day's high. The low was $25.68.

Targa falls

In other trading of preferreds on Thursday, Houston-based Targa Resources Partners LP's 9% fixed-to-floating-rate cumulative redeemable preferred units (OTC: TGARP) closed out Thursday at $25.00, down 3 cents, after the greenshoe was partially exercised on Wednesday.

The bookrunners sold an additional $15 million of the units, bringing total issuance to $125 million.

The over-allotment option allowed for up to $16.5 million additional units to be sold.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, UBS Securities LLC and Wells Fargo Securities LLC were the joint bookrunners for the deal, which priced Oct. 7.

On Thursday the units from the natural gas and natural gas liquids services company traded as high as $25.05 and as low as $24.80.

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