On Friday, JPMorgan Chase & Co. JPM announced the redemption of trust preferred securities (TruPS) worth $1.5 billion. The securities to be fully redeemed include 6.70% Capital Securities, Series CC. The redemption is scheduled to take place on Apr 2, 2015.
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 to the date of redemption to its shareholders. JPMorgan further added that it will utilize the existing available cash to fund these redemptions.
Back in May 2013, JPMorgan redeemed about $5 billion in TruPS. The redemption included securities of series J, K, L, N, P, S and X worth $4.8 billion.
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.
TruPS redemption is viewed as a positive step for the banks, enabling them to bring down interest expenses, as these securities demand higher rates than other securities and often the banks replace TruPS with equity or other low-cost debt. Further, according to the Dodd-Frank Act, banks are no longer allowed to consider these securities as regulatory capital as of 2013.
Currently, JPMorgan carries a Zacks Rank #3 (Hold). Some better-ranked finance stocks worth considering include MidWest One Financial Group, Inc. MOFG and Heartland Financial USA, Inc. HTLF with a Zacks Rank #1 (Strong Buy), while Northern Trust Corp. NTRS carries a Zacks Rank #2 (Buy).
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