Hudson City Bancorp Inc.
) reported fourth-quarter 2013 operating earnings of 9 cents per
share, beating the Zacks Consensus Estimate by 2 cents. However,
this compares unfavorably with the prior-year quarter figure of
HUDSON CITY BCP (HCBK): Free Stock Analysis
INVESTORS BANCP (ISBC): Free Stock Analysis
M&T BANK CORP (MTB): Free Stock Analysis
WSFS FINL CORP (WSFS): Free Stock Analysis
To read this article on Zacks.com click here.
Quarterly results at Hudson City mainly came on the back of
increased non-interest income and no provision for loan losses.
Further, decreased expenses and a strong capital position were
the tailwinds for the quarter. However, a decline in the top line
due to lower net interest income was a negative.
Hudson City's net income for the quarter came in at $45.8
million, compared with $47.9 million in the prior-year quarter.
For 2013, net income was $185.2 million or 37 cents per share
compared with $249.1 million or 50 cents per share in the prior
year. However, results outpaced the Zacks Consensus Estimate by 2
Performance in Detail
For 2013, Hudson City's total revenue, net of interest expense
was $651.6 million, down 24.7% from the prior year. Yet, revenues
outpaced the Zacks Consensus Estimate of $640.0 million.
The company reported total revenue of $149.4 million in the final
quarter, down 23.4% from the year-ago quarter. However, revenues
were above the Zacks Consensus Estimate of $137.0 million.
Hudson City's net interest income decreased 29.3% year over year
to $135.9 million in the quarter. The fall was mainly due to the
overall decline in the average balance of interest-earning assets
and interest-bearing liabilities and the persistent low interest
rate environment. Net interest margin came in at 1.20%, down from
1.75% in the year-ago quarter.
Non-interest income came in at $13.5 million, substantially up on
a year-over-year basis. Reported quarter results included $11.1
million gain on the sale of mortgage-backed securities. There
were no securities sales in the prior-year quarter.
Total non-interest expense waned 16.1% from the prior-year
quarter to $73.5 million. The decline was primarily due to lower
federal deposit insurance expense, partially offset by a rise in
other non-interest expense.
The efficiency ratio deteriorated to 48.77% from 44.87% in the
year-ago quarter. An increase in the efficiency ratio indicates
decline in profitability.
Credit metrics were a mixed bag in the reported quarter.
Nonperforming loans declined to $1.05 billion as of Dec 31, 2013,
down 9.5% year over year. There was no provision for loan losses
in the reported quarter compared with $25.0 million in the
year-ago quarter. The decrease was primarily due to a fall in
total delinquent loans and total loans.
Nonperforming assets decreased 7.4% year over year to $1.12
billion. However, net charge-offs stood at $14.9 million, up 4.9%
year over year. The ratio of net charge-offs to average loans
came in at 0.24%, up from 0.21% in the prior-year quarter.
Hudson City's capital ratios remained strong during the quarter.
The bank's Tier 1 leverage capital ratio advanced to 10.82% as of
Dec 31, 2013 from 10.09% as of Dec 31, 2012. Equity to total
assets was 12.28%, compared with 11.58% as of Dec 31, 2012. Total
risk-based capital ratio was 25.31%, up from 21.59% in the
M&T Bank and Hudson City Merger Delayed
M&T Bank Corp
) proposed acquisition of Hudson City in a cash and stock deal
worth $3.7 billion - the largest deal in 2012 - has being delayed
further. The companies anticipate regulatory approvals to take
more time, which would consequently push back completion of the
M&T Bank believes that the approval is not likely before the
second half of 2014. Therefore, M&T Bank and Hudson City have
planned to extend the deal's closure date from Jan 31, 2014 to
Dec 31, 2014, after which either of the two companies may
terminate the merger agreement if it is still not complete.
M&T Bank and Hudson City plan to complete the merger at the
earliest, following the sanction of regulatory bodies and
shareholders as well as fulfillment of other customary criteria.
An unfavorable interest-rate environment, sluggish economic
recovery and uncertainty surrounding the new and anticipated
regulations are likely to be headwinds for Hudson City.
Despite the restructuring in Hudson City's business model, amid a
low interest-rate environment, the company was encountering
challenges in its growth trajectory. Although it announced
some initiatives to diversify in 2012, it did not have adequate
flexibility with respect to its balance sheet. Hence, the
above-mentioned deal was a strategic fit for Hudson City.
The deal would combine Hudson City's retail network with M&T
Bank's full service commercial banking suite and help expand the
premier community banking franchise in eastern U.S. Hence,
shareholders can benefit from the enhanced scale of business of
the combined entity.
Hudson City currently carries a Zacks Rank #4 (Sell). Among some
better-ranked stocks in the same sector -
Investors Bancorp Inc.
WSFS Financial Corp.
) are scheduled to report their fourth-quarter 2013 earnings on