Hudson City Lag on Rev & Earnings - Analyst Blog
May 01 2013 - 10:36AM
Zacks
Hudson City Bancorp Inc. (HCBK) reported its
first-quarter 2013 operating earnings of 10 cents per share, a
penny below the Zacks Consensus Estimate. Moreover, this compares
unfavorably with the year-ago earnings of 15 cents per share.
The lower-than-expected results at Hudson City mainly came on the
back of a fall in revenue due to declining net interest and
non-interest income. However, lower expenses and a strong capital
position were the tailwinds for the quarter. Lower provision for
loan losses also came as a positive.
Hudson City’s net income for the quarter came in at 47.9 million,
compared with $73.0 million in the prior-year quarter.
Quarter in Detail
Hudson City’s total revenue was $179.9 million, down 24.1% from the
year-ago quarter. Further, revenues were lower than the Zacks
Consensus Estimate of $192.0 million.
Hudson City’s net interest income decreased 24.2% year over year to
$177.4 million. The decrease in net interest income reflects the
decline in the average balance of interest-earning assets and
interest-bearing liabilities and the continued low interest-rate
environment. Net interest margin came in at 1.78%, down from 2.15%
in the year-ago quarter.
Hudson City’s non-interest income came in at $2.5 million, down
10.7% year over year, reflecting a decrease in service charges and
other income.
Moreover, total non-interest expense at Hudson City waned 11.3%
from the prior-year quarter to $81.3 million. The decline was
primarily driven by lower compensation and employee benefit costs,
partially mitigated by an increase in other expenses.
However, the efficiency ratio increased to 45.12% from 38.66% in
the year-ago quarter. The increase in efficiency ratio indicates a
decline in profitability.
Credit Quality
Credit metrics displayed mixed results in the quarter.
Non-performing loans reached $1.14 billion as of Mar 31, 2013, down
1.7% sequentially but up 27.3% year over year. The ratio of
non-performing loans to total loans was 4.35% as of Mar 31, 2013,
up from 4.29% in the prior quarter and 3.71% in the year-ago
quarter.
The ratio of nonperforming assets to total assets stood at 2.98% in
the reported quarter, in line with the prior quarter and up from
2.49% in the comparable quarter last year.
However, the ratio of net charge-offs to average loans came in at
0.32%, above 0.21% reported in the prior quarter and 0.25% reported
in the year-ago quarter.
Provision for loan losses amounted to $20 million, down 20.0% both
sequentially and on a year-over-year basis. The year-over-year
decrease in provision for loan losses was primarily due to the
stabilization of home prices, a smaller size of the loan portfolio
and a decline in the amount of total delinquent loans.
Capital Ratios
Hudson City’s capital ratios remained strong during the quarter.
The bank’s Tier 1 leverage capital ratio advanced to 10.20% as of
Mar 31, 2013 from 9.17% as of Mar 31, 2012. Equity to total assets
was 11.69% compared with 10.46% as of Mar 31, 2012.
Dividend Update
Concurrent with the earnings release, Hudson City declared a
quarterly cash dividend of 4 cents per share. The dividend will be
paid on May 30 to shareholders of record on May 14.
Our Viewpoint
An unfavorable interest-rate environment, sluggish economic
recovery and uncertainty surrounding the new and anticipated
regulations are likely to be the headwinds for Hudson City.
However, in Aug 2012, M&T Bank Corporation
(MTB) agreed to takeover Hudson City in a cash-and-stock deal. The
deal is expected to close upon the receipt of all essential
regulatory and shareholder approvals and satisfaction of all other
conditions.
Amid a low interest-rate environment and despite restructuring,
Hudson City’s business model 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, this deal is 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. This will also
provide M&T bank the fourth-largest deposit share in N.J.
Hence, the shareholders can benefit from the enhanced scale of
business of the combined entity.
Hudson City currently carries a Zacks Rank #3 (Hold). Other stocks
in the same sector that are performing well and worth considering
include American National Bankshares Inc. (AMNB)
and Crescent Financial Bancshares, Inc. (CRFN).
Both these stocks carry a Zacks Rank #1 (Strong Buy).
AMER NATL BNKSH (AMNB): Free Stock Analysis Report
CRESCENT FINL (CRFN): Free Stock Analysis Report
HUDSON CITY BCP (HCBK): Free Stock Analysis Report
M&T BANK CORP (MTB): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Hudson City Bancorp (NASDAQ:HCBK)
Historical Stock Chart
From Jul 2024 to Aug 2024
Hudson City Bancorp (NASDAQ:HCBK)
Historical Stock Chart
From Aug 2023 to Aug 2024