JPMorgan Doubles Offering to Sell $1.1 Billion of Preferreds

JPMorgan Chase & Co. (JPM), the largest U.S. lender by assets, sold $1.1 billion of perpetual preferred shares, more than double what it had planned, after selling $2.5 billion of bonds earlier this month.

The bank issued $25 shares, callable after five years, to yield 5.5 percent, Bloomberg data show. The offering was earlier marketed at $500 million, according to a person familiar with the transaction.

“We have seen financials hit the market more aggressively recently,” Marc Pinto, head of corporate bond strategy at Susquehanna International Group LLP, said in a telephone interview. “It has been a particularly active market as of late for preferreds.”

JPMorgan last issued benchmark dollar-denominated debt on Aug. 13, selling 2 percent, five-year bonds to yield 135 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. The debt traded at 99.68 cents on the dollar to yield 2.07 percent on Aug. 17, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Banks are selling preferred shares in part to get ready for changes in capital regulations linked to the Basel III international banking requirements, Pinto said. There has been $7.5 billion in $25 per share preferred issuance over the past six weeks, according to Pinto.

Basel III

The Basel III guidelines, which will be phased in from 2013 to 2019, call on regulators to boost capital requirements for banks, limit what instruments count toward capital and force banks to rely more on equity than debt funding.

“Rates are extremely low so it’s a very attractive market for them to issue in,” Pinto said. “Investors are looking for yield, and it’s very hard to find these days, so a number of people are going to the preferred market.”

Wells Fargo & Co (WFC) sold $750 million of preferred shares at 5.2 percent on Aug. 9, Bloomberg data show. Capital One Financial Corp. (COF) issued $875 million of preferreds at 6 percent on Aug. 13.

JPMorgan’s new shares may be rated Ba1, the highest level of speculative grade, by Moody’s Investors Service, said the person, who asked not to be identified because the terms aren’t set. Proceeds will be used for general corporate purposes. New York-based JPMorgan handled the sale.

To contact the reporter on this story: Sarika Gangar in New York at sgangar@bloomberg.net;

To contact the editor responsible for this story Alan Goldstein at agoldstein5@bloomberg.net;