JPMorgan to Redeem $5B TruPS - Analyst Blog
April 09 2013 - 6:10AM
Zacks
JPMorgan Chase & Co. (JPM) announced its
decision to redeem about $5 billion in trust preferred securities
(TruPS). The redemption is scheduled on May 8, 2013.
The redemption will be in accordance with the voluntary redemption
provisions present in the documents relating to the TruPS. Further,
JPMorgan has fixed the price of redemption of securities at 100% of
the liquidation amount. The company will pay this redemption price
along with the distribution outstanding and due on the securities
up till the date of redemption to its shareholders. JPMorgan
further added that it will utilize the existing available cash to
fund these redemptions.
The TruPS to be redeemed by JPMorgan includes securities of series
J, K, L, N, P, S and X worth $4.8 billion. The interest rate on
these securities ranges from 6.2% – 7.2%. Further, it will redeem
7.2% preferred securities amounting to $100 million.
Earlier, in Jul 2012, JPMorgan redeemed about $9 billion in TruPS.
The redemption included $5.7 billion worth of capital securities
related to different series and Fixed-to-Floating Rate Capital
Securities worth $3.3 billion.
In Apr 2012, JPMorgan redeemed about $425 million in TruPS, which
included the redemption of 17 million worth 7.20% preferred
securities issued by BANK ONE Capital VI.
The redemption of the TruPS is expected to auger well for JPMorgan
as it will provide an opportunity to the bank to reduce its
interest expenses since these securities demand higher rates than
other securities.
Apart from JPMorgan, other financial institutions that have planned
TruPS redemption include Zions Bancorp. (ZION) and
Citigroup, Inc. (C). Zions plans to redeem 8%
Series B TruPS comprising 11.4 million shares, having a collective
liquidation value of $285 million. On the other hand, Citigroup
plans to redeem TruPS worth $3 billion.
JPMorgan is scheduled to announce its first-quarter 2013 earnings
on Apr 12, 2013. The Zacks Consensus Estimate for first-quarter
2013 is pegged at $1.36 per share on revenue expectations of $25.3
billion. The earnings ESP (Read: Zacks Earnings ESP: A Better
Method) for the company is +5.15% for first quarter 2013. This,
along with its Zacks Rank #2 (Buy), make us confident of a positive
earnings surprise.
We also like another major bank State Street
Corporation (STT) with a Zacks Rank #2 (Buy).
CITIGROUP INC (C): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis Report
STATE ST CORP (STT): Free Stock Analysis Report
ZIONS BANCORP (ZION): Free Stock Analysis Report
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