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Hudson City Bancorp, Inc. Message Board

  • j2s32 j2s32 Jan 19, 2011 10:51 AM Flag

    Why HCBK isnt very good but undervalued


    Ron Hermance is a m.or......on.

    Let me explain what HBCK did that got them into this mess.

    1) MBS (Mortgage backed security) (Like a stock) Kept rising he invests 30 B in them at a 6% yield borrows from the Federal Home Loan Bank at 4.5% increases HCBK earnings by 50-60 M a quarter

    2) MBS yields decline but locked into Borrowing rates. MBS yields drop to 4% 3.5% still have 30B borrowed. Cant buy it out since FV higher. So they lose money every quarter on their borrowings.

    3) Hermance should be fired he took to many risks. If you eliminate all HCBK's borrowing and MBS the bank is twice as valuable.

    The number just makes the bank super risky (lol there is still no risk) but the MBS makes it so much riskier.

    Despite all of this HCBK is still a buy the stock should be worth $15 or $16.

    I am just saying their business model sucks.

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