On Jul 2, 2013, we reiterated our long-term Neutral
Hudson City Bancorp, Inc.
), primarily based on
M&T Bank Corporation
) agreement with the Fed and the expectation of the merger with
M&T to be complete in the near term. However, declining asset
quality metrics is a negative for the company.
FIRST PACTRUST (BANC): Free Stock Analysis
HUDSON CITY BCP (HCBK): Free Stock Analysis
M&T BANK CORP (MTB): Free Stock Analysis
PROVIDENT FINL (PROV): Free Stock Analysis
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M&T Bank has agreed to take over Hudson City in a
cash-and-stock deal worth $3.7 billion. The deal ran into
regulatory difficulties regarding M&T Bank's anti-money
laundering program, and was consequently delayed. However, an
agreement took place between the Fed and M&T Bank recently.
With the deal likely to close in the near term, shareholders are
anticipated to benefit from projected synergies of the combined
We are also impressed with the company's balance sheet
restructuring, which substantially reduced higher-cost structured
borrowings. Such efforts will support the company's growth
strategy and enable it to effectively compete in the residential
mortgage marketplace, going forward.
Hudson City's first-quarter 2013 operating earnings of 10 cents
per share missed the Zacks Consensus Estimate by a penny.
Moreover, this compares unfavorably with the year-ago earnings of
Lower-than-expected results at Hudson City mainly were due to
lower revenues, resulting from declining net interest as well as
non-interest income. However, decreased expenses and a strong
capital position were tailwinds for the quarter.
Over the last 60 days, the Zacks Consensus Estimate for 2013
moved down by 2% to 41 cents. For 2014, the Zacks Consensus
Estimate fell 5% to 37 cents over the same time period. Hence,
Hudson City currently carries a Zacks Rank #4 (Sell).
Additionally, we are concerned about the company's net interest
margin (NIM), which has been volatile for the past couple of
years. Moreover, we believe that with interest rates remaining at
near-historic lows, a more intense competition for mortgage loans
- due to the involvement of GSEs, together with no notice from
the Fed regarding any interest rate rise in the near future -
will compress net interest margin further.
Other Banks Worth Considering
Some other banks in the same sector that are worth considering
Provident Financial Holdings, Inc.
First Pactrust Bancorp, Inc.
). All of them carry a Zacks Rank #1 (Strong Buy)