Hudson City Bancorp, Inc. (HCBK)

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The Company serves as the holding company of its only subsidiary, Hudson City Savings Bank.

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Avatar mandrake66 (99.36) Submitted: 5/30/08 2:51 PM : Start Price: $17.61 HCBK Score: -15.83

http://online.barrons.com/article/SB121158262532418595.html?mod=9_0031_b_this_weeks_magazine_main&page=3

"And, even with all that, they will earn less than a 10% return on equity this year, so I just don't get the valuation. Furthermore, when you have a wholesale business model, that means you don't really have a valuable franchise that another bank would pay much for. So a recent stock price represented approximately a 100% premium for their core deposits, which is how bank acquisitions typically get priced. And I don't think their deposits are worth nearly that much to a buyer. Everything looks great for them now, if you a call 10% ROE great. But they are not immune to credit risk in a recession and a weak housing market. I also think their loan-loss reserve at 0.15% is very low, relative to others'. When the Fed rate-cutting cycle is over, I don't want to own a spread play with credit risk that's trading at two times book."

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Avatar anchak (< 20) Submitted: 5/31/08 10:24 PM

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You may be right on this from a CAPS standpoint...but beware with real money. They do have an incredibly low LLR. I think very very unrealistic....but next question is how high can it go.

(1) Their NPAs are in low 40 bps range - but growing - I think they top out around 100-150 bps. That's not high by any standard. It would still require them to possibly TRIPLE their LLR - but its an earnings hit -nothing earthshaking.
(2) Their main problem looks like their concentration in the NY Metro area - their loss avoidance ( way out) seems to be "our borrowers experiencing difficulty have typically adequate equity by which they can repay by disposing off their property" ( Not exactly a qoute - but a paraphrase) - a little rosy view - if liquidity becomes an issue in NY - then even if you have a good property moving it may not be easy.

(3) they have one of the lowest net margins - just a little variability and they will suffer earnings problems.

Hence, as a concept - this is good - however, as fools have put - this is one of the cleanest one.

My 2 cents - I would actually have green thumbed , if I could - just not much space - just to go against the general tide.

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Avatar mandrake66 (99.36) Submitted: 6/02/08 5:33 PM

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Oh, I would never put real money on this. But thanks for the information.

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Hudson City Bancorp, Inc. (HCBK)

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