Yahoo Finance Citizens Joins Regional Banks Turning to Preferred Retail Market
(Bloomberg) -- Citizens Financial Group Inc. is looking to raise capital with a previously out-of-favor type of preferred shares that is now staging a comeback among US regional banks.
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The Rhode Island-based lender is offering a $250 million perpetual issue that will be callable in five years’ time and pay the same coupon until the stock is redeemed, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it.
The issue will be sold at $25 apiece to make it more attractive for retail investors, with price guidance set between 7.5% and 7.625%, the person said.
Bloomberg has reached out to Citizens for comment.
The offering comes shortly after another regional lender, M&T Bank Corporation, achieved the same cost of capital as Goldman Sachs Group Inc. with the sale of fixed-for-life preferred stock. Goldman, by contrast, issued a more common type of share that switches from an initial fixed rate to floating coupons, typically at larger chunks of $1,000 each.
Read more: M&T Bank Taps Preferred Retail Market to Get Goldman-Level Rate
Citizens currently has six other preferred issues outstanding, with some paying floating dividends above 8.5%, based on data compiled by Bloomberg. The lender will use the proceeds of the new issue to repay its highest-coupon preferred series, the person familiar said.
The fresh offering comes as the chief fixed-income strategist at LPL Financial Holdings Inc advised caution among advisers who manage money for ordinary Americans when it comes to buying regional banks’ preferred stocks, given some lenders’ exposure to the volatility of commercial real estate.
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