Hudson City Bancorp 2nd-qtr profit up 52 pct

Wed Jul 23, 2008 8:50am EDT
(New throughout)

NEW YORK, July 23 (Reuters) - Hudson City Bancorp Inc said on Wednesday quarterly profit increased 52 percent, as changes in interest rates allowed the third-largest U.S. savings and loan to lower deposit rates even as mortgage yields stayed stable.

Despite a tripling of bad loans, the results suggest the parent of Hudson City Savings Bank is still avoiding the serious credit problems afflicting other mortgage lenders. Hudson City specializes in mortgages for one-family, owner-occupied homes.

Second-quarter profit rose to $110.7 million, or 22 cents per share, from $72.7 million, or 14 cents, a year earlier.

Analysts on average expected profit of 21 cents per share, according to Reuters Estimates. Paramus, New Jersey-based Hudson City also increased its quarterly dividend 9 percent to 12 cents per share.

Hudson City uses what it calls a strong capital base and low operating costs to attract lower-risk customers who want higher-yielding deposits, and want to borrow money to take out or refinance home loans.

"Our strong capital and liquidity position allows us to take advantage of a market in turmoil," Chief Executive Ronald Hermance said in a statement. "While economic conditions and the housing markets have shown further weakening, our asset quality remains strong."

Hermance had said last month it was "reasonable" to expect Hudson City to earn 85 cents per share in 2008, up 46 percent from a year earlier.

Net interest margin rose to 1.97 percent from the first quarter's 1.72 percent. It set aside $3 million for loan losses, up from $500,000 a year earlier, while nonperforming loans rose to $116.3 million from $38.5 million.
The thrift operates 123 branches, and ended June with $49.2 billion of assets and $16.7 billion of deposits.

Shares of Hudson City closed Tuesday at $19.03 on the Nasdaq. They have risen 27 percent this year, compared with a 41 percent decline in the KBW Mortgage Finance Index .MFX. (Reporting by Jonathan Stempel; Editing by Dave Zimmerman and Derek Caney)