Hudson City Bancorp (HCBK) reported 2Q09 operating earnings of $0.24 per share, one penny above our expectation and two pennies below consensus. HCBK continued to experience strong lending revenue, even though provisions for losses increased and other credit quality metrics worsened. Despite the stability in the EPS trends, we remain concerned about the relationship of provisions and non-performing assets, as well as the adverse trends with respect to credit quality metrics and regulatory capital ratios. Prior to the conference call, we are adjusting our FY09E EPS and FY10E EPS to $1.04 per share and $1.20 per share, respectively. We continue to view the shares of HCBK as a Hold, though our concerns remain for the industry and this company over the near term. While the company does not participate in subprime loans, we remain concerned that a virulent type of contagion might creep upwards and negatively ...

One trade I have been extremely bullish on is a long position on the KBW Bank Index [KBE: 18.71, 0.00 (0.00%)] while  shorting the KBW Regional Bank Index [KRE: 21.09, 0.00 (0.00%)].  This trade has worked out very well ever since I wrote on RealMoney’s Columnist Conversation with the trade.  The play is betting on the relative out-performance of the large cap banks compared to smaller regional banks.  The trade is unique in the sense that you are hedging your downside risk by shorting the Regional Bank Index, but profit when the spread widens.

In more detail, the KBE is an ETF of the 20 largest banking institutions in the U.S.  Players like Bank of America [BAC: 11.31, 0.00 (0.00%)], Wells Fargo [WFC: 25.69, 0.00 (0.00%)], J.P. Morgan, US Bancorp, and Bank of New York Mellon [BK: 28.44, 0.00 (0.00%)]

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Highlights include Citigroup, Inc. (C) and JPMorgan Chase & Co., Inc. (JPM), Bank of America Corp. (BAC) and Hudson City Bancorp (HCBK). Realtors will tell you that every real estate market is different. While there is some truth to that, the decline we are seeing in housing prices is very broad-based. The graph below (larger version available at http://www.calculatedriskblog.com/) shows the decline from peak levels in each of the 20 markets followed by the Case Schiller index. Every market is off by at least 10%, but it is clear that Dallas, Charlotte and Denver have been holding up the best so far. On the other hand, seven areas -- more than one third of the markets -- are down more than 40% from peak levels. Phoenix is in ashes with

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For Immediate Release

Chicago, IL - April 23, 2009 - Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Morgan Stanley (MS), Hudson City Bancorp (HCBK), Millicom International Cellular (MICC), GlaxoSmithKline, plc (GSK) and Gilead Sciences, Inc. (GILD).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=4579.

Here are highlights from Wednesday's Analyst Blog:

Morgan Stanley Reports a Loss

Morgan Stanley (MS) reported its 1Q09 results this morning. Net loss applicable to common shareholders was $578 million, or $0.57 per share, compared to a profit of $1.41 billion, or $1.26 a share in the first

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After market close, Hudson City Bancorp (HCBK) reported 1Q09 earnings of $0.26 per share, a penny above our expectation and consensus. Results again experienced strong lending revenues, even though provisioning level increased and other credit quality metrics expanded.Despite stability in the EPS trends, we remain concerned as to the relationship of provisions and non-performing assets, as well as the adverse trends with respect to credit quality metrics and regulatory capital ratios.For now we are leaving our FY09E EPS at $1.10 per share, but lowering our FY10E EPS to $1.30 per share. We continue to view the shares of HCBK as a Hold, though our concerns remain for the industry and this company over the near term. Read the full analyst report on "HCBK"Zacks Investment Research

Long time readers will know our love/hate relationship with earnings season. As information hogs we love more data; but as stock market participants we hate the massive overreactions to companies based on 90 days of business and a penny here or there in earnings per share, or +/- 1-2% of revenue on the top line. But this is the only game in town and if certain companies should win or lose 20-30% of their market value within seconds of the all important press release is not up to us; this is the market “we’ve” created. So we’ll gap up or down in many individual stocks, and the market as a whole based on 1-2 “important” companies that – based on a few pennies here or there – shift the entire complexion of a $14 Trillion economy. Or so the pundits will …

Equity income is a good choice for conservative investors who need to rely upon their portfolio to provide income to support their lifestyle.

Equity income investing tends to involve a trade-off between capital gains potential and current cash flow to the investor.  In a depressed market such as the one we are in now, equity income in “safe” companies offers more potential for capital gains than usual, making dividend investing all the more attractive to the conservative investor.

What About Bonds?

Bonds are good for income too, but the income does not increase (with the possible exception of inflation protected bonds and perhaps some variable rate bonds).  Bonds have a definite capital preservation and volatility reduction role in portfolios — and a tax reduction role in the case of municipal bonds.  Dividends from successful companies, however, tend to increase over time, helping the portfolio maintain the purchasing power of its cash income stream.

Contribution

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Overall, we continue to maintain a negative outlook on both U.S. and non-U.S. Banks in the near-to-medium term.

The new Financial Stability plan announced by the Treasury Secretary Tim Geithner fell short on the details and we think that the benefits, if any, will take a long time to come by. While the earlier programs launched by the government have helped alleviate the capital and funding concerns to a great extent, the efforts have not succeeded in restoring the lending activity at banks.

It remains to be seen whether these steps and others like them in other countries will be sufficient to restore confidence in the financial system and increase lending.

In the meantime, lower lending activity will continue to hurt the margins though the low interest rate environment should be beneficial to the banks with a liability sensitive balance sheet.

It still remains a bit

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TheTreasury Department’s new bailout plan would require participation from private investors and would include government guarantees to limit losses. The details remain explained, but skepticism and fears of another crash are running high. For more information, read the following article from Money Morning:

By relying on asset-backed securities, large amounts of leverage and unregulated hedge funds as its key elements, the U.S. Treasury Department’s overhaul of the banking-system bailout plan is essentially relying on some of the same ingredients that caused the financial crisis in the first place.

This time around, someone should take the punch bowl away before the party even gets started. Otherwise, as Yogi Berra once said, it will be “Déjà vu all over again.”

The only difference this time around is that the U.S. Treasury Department is calling the plays.

Backdrop on a bailout

In a press conference Tuesday, U.S. Treasury Secretary Timothy …

By relying on asset-backed securities, large amounts of leverage and unregulated hedge funds as its key elements, the U.S. Treasury Department’s overhaul of the banking-system bailout plan is essentially relying on some of the same ingredients that caused the financial crisis in the first place. This time around, someone should take the punch bowl away before the party even gets started. Otherwise, as Yogi Berra once said, it will be “Déjàvu all over again.” The only difference this time around is that the U.S. Treasury Department is calling the plays. Backdrop on a Bailout In a press conference Tuesday, U.S. Treasury Secretary Timothy F. Geithner unveiled the long-awaited successor to the Bush administration’s Troubled Assets Relief Program (TARP).  The reaction was swift. Stocks plunged after the 11 a.m. press conference began when Secretary Geithner introduced a new rescue plan that was light on ...