On Jun 20, 2014, we issued an updated research report on Hudson City Bancorp, Inc. (HCBK). This New Jersey-based savings and loan institute is on track with its strategic initiatives to boost the overall performance of the company.
Hudson City adopted a strategic plan laying down objectives for the company’s overall risk profile, earnings performance, growth and balance sheet mix and enhancement of the enterprise risk management program. The initiatives include secondary mortgage market operations, commercial real estate lending and introduction of small business banking products.
Notably, given the delay in the merger with M&T Bank Corporation (MTB), Hudson City initiated commercial real estate lending and secondary mortgage market operations during first-quarter 2014.
In the fourth quarter of 2011, Hudson City completed its balance sheet restructuring, which substantially reduced higher-cost structured borrowings. Interest expenses declined in the subsequent years, and the downward trend continued in the last quarter. As part of its strategic plan, the company proposes further restructuring in 2014 and anticipates net interest margin and future earnings to improve.
Though the full implementation of such initiatives will require significant time, we believe these to be beneficial for the company in the long run.
Further, Hudson City reported first-quarter 2014 earnings per share of 9 cents, beating the Zacks Consensus Estimate by 28.6%. Results were aided by increased non-interest income, lower expenses and no provision for loan losses.
Nevertheless, we remain cautious owing to several issues faced by Hudson City. The persistent delay in completion of the merger deal with M&T Bank owing to regulatory issues raises concern for the company’s future growth prospects. Moreover, a sluggish economic growth and stringent regulations remains the headwinds.
Over the past 60 days, the Zacks Consensus Estimate advanced 3.7% to 28 cents per share for 2014, while it fell 12.5% to 28 cents per share for 2015.
Hudson City currently carries a Zacks Rank #3 (Hold).
Anchor Bancorp (ANCB) and Great Southern Bancorp Inc. (GSBC) are better-ranked stocks in this space. Both the stocks sport a Zacks Rank #1 (Strong Buy).
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