Editor's Note: Since the publication of this article, Hudson City Bancorp has been acquired by M&T Bank. You can learn more about M&T Bank here.
The closure of Chicago based lender ShoreBank Corporation brought the number of "failed" banking groups for 2010 to 118, a sure sign that the impact of the global financial crisis is still being felt.
However with upheaval comes opportunity and dividend seeking investors may want to take a closer look at Hudson City Bancorp (HCBK), regarded by many as America’s "most efficient bank". The company trades on a price to earnings multiple of 10.4 times earnings and offers a dividend yield around 5%, the highest in the banking sector at the moment.
With over $60 billion in assets, Hudson City (HCBK) is the largest savings bank and is among the top twenty-five banks in the United States. It was voted amongst America's Best Managed banking groups by Forbes in 2007, 2008 and 2009.
The strength of the company was recently highlighted by Ronald E. Hermance, Jr., Chairman, President and CEO who pointed out to investors that the group had demonstrated its operational qualities through the crisis.
"Hudson City (HCBK) never took, or needed, any TARP or other assistance. In fact, during the crisis we remained one of the few home lenders that supported our markets and customers with home mortgage loans. From January 1, 2008 through June 30, 2010, our total loan production was approximately $21.0 billion, all of which we retained in our portfolio.”
Reporting quarterly earnings recently the company delivered an 11.5% increase in net income for the second quarter of 2010 to $142.6 million, while earnings per share increased 11.5% to $0.29.
Bad debts were also down. Non-performing assets are growing at a slower pace and it is believed the real estate markets are stabilizing. Non-performing loans increased by $45.3 million which is the smallest increase since the third quarter of 2008, and charge-offs for this quarter were slightly less than in the linked 2010 first quarter.
Despite the upbeat performance, the company did however warn that elevated unemployment and underemployment rates and a weak economic recovery will continue to put pressure on consumers.
While investors will remain wary of the banking sector for a while yet, dividend seeking investors may do well to stock up on Hudson City (HCBK) if they believe that the market is improving and the bank can continue its proud history of paying regular dividends
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