Ally Financial ends mixed, in line with broad market trend; Bank of America downgraded, falls

By Stephanie N. Rotondo

Portland, Ore., Dec. 15 - Preferred stocks were "largely mixed," a market source said Wednesday.

The holiday slowdown seemed to be in full swing.

"Volume was really light," he said.

"It's the slowest it's ever been," said another trader. "Everything is basically flat."

Ally Financial Inc.'s preferred issues remained actively traded, but they followed the trend of the market and closed mixed.

Bank of America Corp. paper was meantime deemed the day's biggest percentage loser as Fitch Ratings downgraded the Charlotte, N.C.-based bank.

Among new issues, First Niagara Financial Group Inc.'s 8.625% fixed-to-floating-rate preferreds were "still holding in there," according to a source. The deal has yet to list on the New York Stock Exchange.

A trader also speculated that there won't "be any new deals this year." He noted that he had heard rumors of one or two deals that could come in the next two weeks, "but I don't think it's going to happen."

Ally ends mixed

Ally Financial's 8.125% series 2 fixed-to-floating-rate trust preferreds (NYSE: ALLYPA) dominated trading during the midweek session, with over 1 million trust preferreds changing hands.

The issue fell 20 cents, or 1.02%, to $19.45.

The 8.5% series A fixed-to-floating-rate perpetual preferreds (NYSE: ALLYPB) also made the day's top five most active list, though with only about 291,000 preferreds trading.

The preferreds gained 7 cents, closing at $17.80.

A market source said he did not think news that DZ Bank AG was suing Ally - along with Bank of America - over the sale of nearly $290 million of residential mortgage-backed securities explained the volume.

"They have a lot of litigation," the source said of Ally. "DZ has their own problems."

Instead, he opined that the heavy trading was "just investor-specific circumstances," whether it was simply jockeying around or someone liquidating their position.

Ally is a Detroit-based financial services company.

Bank of America weakens

Bank of America securities were moderately active but weaker on Wednesday.

A source speculated that the losses were due to a rating downgrade by Fitch.

The floating-rate series 2 noncumulative preferreds (NYSE: BMLPH) fell 45 cents, or 2.84%, to $15.39. The floating-rate series 1 noncumulative preferreds (NYSE: BMLPG) were one of the day's biggest percentage losers, dropping 86 cents, or 5.39%, to $15.10.

Fitch lowered Bank of America's issuer default rating to A/F1 from A+/F1+ and its preferreds to BBB- from BBB. The change was part of a larger move by Fitch to alter ratings of global banking institutions.

"Fitch believes that [Bank of America] is committed to building capital over time to a level more in line with peer averages," Fitch said in a statement. "In fact, BAC has already announced actions in fourth quarter 2011 that will significantly benefit the tier 1 common ratio. However, in the near term [the bank] will continue to lag major U.S. peers in capital strength while at the same time carrying higher-than-average overall risks in Fitch's view."

Fitch also noted that Bank of America faces larger ongoing litigation risk.

First Niagara hangs in

First Niagara Financial's $350 million issue of 8.625% fixed-to-floating-rate series B preferreds were "still holding in there," a source said.

He pegged the issue at $25.15 bid, $25.24 offered.

Another trader placed the issue at $25.20 shortly before the close.

The Buffalo-based bank priced the issue last week.

© 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.