Stress test results posted, Euro-toxin fears ease; National Bank of Greece passes, rallies

By Stephanie N. Rotondo

Portland, Ore., July 15 - Preferred stocks were trending higher Friday but not in the robust fashion some market players had hoped following the release of the European Banking Authority's second round of stress test results.

"I thought we might see some action with the European bank review," a trader said. However, the announcement "seemed like a non-event. People think that it wasn't that scrutinizing because it doesn't include sovereign debt."

Another trader agreed that the stress test results were the day's "big thing," but even he conceded that it was a non-event.

"People were still moving out of Europe exposure," he said. "But that's not a surprise."

Out of all the banks tested, only eight banks failed to pass. National Bank of Greece SA passed the test, which helped its preferreds regain some lost ground.

Meanwhile, Citigroup Inc. announced its second-quarter earnings, which showed a 24% increase from the year before. While the bank's preferreds were higher, trading was relatively thin across all the issues.

"Basically, nobody cared," a trader said.

European risk still iffy

The European Banking Authority's stress test results showed that eight banks - Greece's EFG Eurobank Ergasias SA and Agricultural Bank of Greece SA, Austria's Oesterreichische Volksbanken AG and Spain's Banco Pastor SA, Caja de Ahorros del Mediterraneo, Banco Grupo Caja3, CatalunyaCaixa and Unnim - failed a second round of stress tests.

The failure means that the banks would have insufficient reserves to maintain their tier 1 capital ratios in the event of another economic crisis.

The combined shortfall was about $3.5 billion.

While the results were largely expected, it did help the overall market gain ground even as some investors continued to avoid European risk.

Royal Bank of Scotland Group plc's series G preferreds (NYSE: RBSPG) dipped 4 cents to $13.61, with 1.25 million preferreds changing hands. The series Es (NYSE: RBSPE) meantime increased 4 cents to $13.69 on volume of about 679,000 preferreds.

Barclays plc's series D preferreds (NYSE: BCSPD) fell a nickel to $25.60. The series As (NYSE: BCSPA) dropped 26 cents to $24.57, and about 225,000 of them turned over.

Greek bank gets a boost

National Bank of Greece's 9% series A preferreds (NYSE: NBGPA) shot up nearly 30% after a second round of stress test results posted by the European Banking Authority showed that the bank passed.

The preferreds gained $1.80, or 29.61%, to close at $7.89.

The E.U. banking unit announced the results of the tests around midday on Friday.

National Bank of Greece passed an adverse scenario test with a tier 1 capital ratio of 7.7%.

Citi up on numbers

Citigroup released its second-quarter results Friday, and its preferreds trended upward on the 24% increase in profit.

The 8.5% series Js (NYSE: CPJ) moved up 14 cents to $25.96 on volume of nearly 187,000 preferreds. The series Ns (NYSE: CPN) meantime increased 8 cents to $27.62 on volume of 713,740 preferreds.

For the quarter, Citi reported net income of $3.34 billion, or $1.09 per share, up from $2.7 billion, or $0.90 per share, the year before.

Revenue, however, fell 7% to $20.6 billion.

The third-largest U.S. bank also noted that it had $22 billion worth of exposure to Europe, $9 billion of which was unfunded exposure.

Endurance busy, better

Endurance Specialty Holdings Ltd.'s 7.5% series B noncumulative preferreds (NYSE: ENHPB) gained 21 cents to close at $25.25. Volume was about 441,000 preferreds.

There was no news out on the Bermuda-based reinsurance company.

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