Hudson City Upped to Neutral - Analyst Blog

We have recently upgraded our recommendation on Hudson City Bancorp Inc. (HCBK) to Neutral.

Hudson City's third-quarter earnings came at 25 cents per share, a penny behind the Zacks Consensus Estimate, reflecting lower interest margin and higher provision for loan losses. Pressure on earning assets and margin is expected to continue with the low interest rate environment, which we expect will persist in the upcoming quarters, thereby dampening investors' appetite for this stock. Along with this, the elevated credit cost levels remain a concern for the company. However, the negatives have already been factored in the current valuation.

Additionally, Hudson City's strong business model, solid capital position and conservative underwriting remain impressive.Therefore, with expectation for an improvement in the economy in the upcoming quarters, we expect Hudson City's earnings to grow.

A close look at the estimate revision trends also justifies that there is no clear directional pressure over the shares. Out of the 16 analysts following Hudson City, in the last 30 days, one analyst revised the estimate downward for the fourth quarter of 2010. For full-year 2010, one analyst revised the estimate upward while another analyst moved in the opposite direction.

For the first quarter of 2011, in the last 30 days, one analyst moved the estimate north while another moved south. The current Zacks Consensus Estimate for Hudson City's earnings is 23 cents per share for the fourth quarter, $1.07 per share for full-year 2010 and 22 cents for the first quarter of 2011.

Hudson City Bancorp, which has peers such as New York Community Bancorp Inc. (NYB) and People's United Financial Inc. (PBCT), is a Delaware corporation that serves as the holding company of its only subsidiary, Hudson City Savings Bank. The principal asset of the company is its investment in Hudson City Savings Bank, a well-established community financial institution serving its customers since 1868. Notably, Hudson City Savings Bank is ranked in the top twenty-five U.S. financial institutions by asset size and is the largest thrift institution.

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