Citicorp this week is expected to start marketing an issue of adjustable-rate preferred stock totaling at least $150 million.

The issue, which capital market sources say is likely to be increased to more than $200 million, follows on the heels of a $227.5 million ARP offering by Chase Manhattan last week.- A Citicorp official declined to comment.

Capital markets sources say the issue will be led by Merrill Lynch & Co. with about half a dozen comanagers.

Yields Set Quarterly

The marketplace is currently more receptive to adjustablerate preferred than to fixed-rate preferred. The yields on fixedrate securities have soared in recent months, and investors have stayed away following the Federal Reserve's switch to tightening monetary policy earlier this year.

Chase's issue is said to have an initial dividend of 6.21%, which resets quarterly at 85% of the highest of the yields on the three-month Treasury bill, 10year Treasury note, and 30-year Treasury bond. By contrast, the dividend on a fixed-rate issue would be at least 8%.

In addition, the yield of Chase's issue is capped at 10.5% and cannot fall below 4.5%.

With equity capital ratios at record levels, most banks have little need for additional preferred stock.

Even banks like Chase and Citicorp, whose capital levels have lagged behind industry averages in recent years, appear to be as interested in refinancing outstanding issues as in building new capital.

Calling In Preferred

Chase is expected to use proceeds of its recent issue to call higher-cost stock. Citicorp has about $200 million in outstanding preferred issues that arc good candidates for refinancing, said a source.

Conversely, Citicorp has more than $2 billion in convertible preferred stock outstanding that could be converted to common stock by the end of next year.

The bank may want to add preferred stock to its capital structure in anticipation of this, said a capital markets source.

Capital regulations limit the proportion of preferred stock to common equity. Citicorp's soaring profits, and the prospect of seeing the convertible preferred issues turn to common stock, give the bank plenty of room to raise additional preferred, said the source.

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