Wells Fargo Joins JPMorgan to Raise $3.5 Billion After Earnings

Wells Fargo & Co. (WFC) and JPMorgan Chase & Co. (JPM), the most profitable U.S. banks, are selling a combined $3.5 billion of debt and preferred stock after generating record income in the first quarter.

Wells Fargo issued $1.15 billion of five-year debt that pays 63 basis points more than the three-month London interbank offered rate and an additional $850 million of its 1.5 percent securities due January 2018 that yield 75 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg.

JPMorgan is planning to issue $1.5 billion of perpetual preferred stock to yield 5.15 percent, according to a person familiar with that transaction who asked not to be identified, citing lack of authorization to speak publicly.

Wells Fargo’s 2018 securities traded at 100.5 cents on the dollar April 11 to yield 1.4 percent, or 67 basis points more than Treasuries, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The offerings follow first-quarter earnings that relied on cost cuts and smaller loan-loss reserves with lending less lucrative. JPMorgan’s net income rose 33 percent to $6.53 billion and Wells Fargo’s profit climbed 22 percent to $5.17 billion.

Relative borrowing costs have been declining, with the extra yield investors demand to own bank debt instead of industrial company obligations narrowing to 8 basis points yesterday, from 103 a year ago, according to Bank of America Merrill Lynch index data.

To contact the reporter on this story: Charles Mead in New York at cmead11@bloomberg.net

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

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