JPMorgan Chase & Co
) announced its decision to redeem about $5 billion in trust
preferred securities (TruPS). The redemption is scheduled on May
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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 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
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
We also like another major bank
State Street Corporation
) with a Zacks Rank #2 (Buy).