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On Mar 26, 2014, we issued an updated research report on New Jersey based Savings & Loan institution  Hudson City Bancorp, Inc. (HCBK - Analyst Report). The company reported impressive fourth-quarter 2013 results aided by increased non-interest income, lower expenses along with no provision for loan-losses in the quarter.

On Jan 29, Hudson City came out with its fourth-quarter 2013 operating earnings of 9 cents per share, beating the Zacks Consensus Estimate by 28.6%. While the company’s non interest income increased significantly and non-interest expenses declined 16% year over year, lower net interest income led to a 23.4% decline in total revenue to $149.4 million.

Following the earnings release, the analysts’ bullish stance on the stock is evident from the rise in the Zacks Consensus Estimate for 2014 and 2015. Over the past 60 days, the Zacks Consensus Estimate advanced 3.8% to 27 cents per share for 2014 and rose 3.2% to 32 cents per share for 2015.

Additionally, Hudson City has consistently exhibited efforts in restructuring its balance sheet, as seen from continued fall in interest expenses since 2011. Further, the company’s Strategic Plan looks promising which is expected to start from mid-2014. This includes origination of residential mortgage loans that fulfill GSE (Government Sponsored Enterprises) guidelines for sale to the GSEs and purchase and origination of commercial real estate loans. Such initiatives will lead to a diverse loan portfolio and reduce concentration risk.

Despite the positives, we remain cautious owing to several issues faced by Hudson City. These include declining net interest margin, absence of credible improvement in asset quality and the prevailing stringent regulatory landscape. Further, the recent announcement of further delay of the proposed merger with M&T Bank Corporation (MTB - Analyst Report) owing to regulatory issues have cast a shadow upon the company’s future prospects.

Hudson City currently carries a Zacks Rank #2 (Buy).

Stocks That Warrant a Look in the Sector

Meridian Interstate Bancorp, Inc. (EBSB - Snapshot Report) and WSFS Financial Corp. (WSFS - Snapshot Report) are better-ranked stocks in this space. Both the stocks hold a Zacks Rank #1 (Strong Buy).
 

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