One Bank That Seems Stable
When I was searching for bank stocks to buy, and take advantage of the currently extreme negativity about banks in general given the current mortgage crisis which spawned the greatest financial meltdown most of us will see in our lifetimes, one came to the forefront as a promising business model with a promising outlook, and minimally impacted bottom lines from what many other banks too part in.
When I say what many other banks took part in, I mean risky lending practices that involved lending to people who were in high risk categories in order to get more money quicker, and to get more of an interest rate out of them . When these subprime loans dropped the ball, and people couldn’t pay them any more, that’s when the whole mortgage and subsequent financial crisis took off, leading to a downfall of the stock market, and straight up consumer panic. You can see why banks aren’t the most popular stocks right now.
That news, combined with the news that the government was providing the largest, seemingly most stable stalwarts of the banking industry with TARP money meant to help keep them from going under after a series of bad business decisions, is the reason you can get bank stocks on the cheap now. But you have to be extremely careful – there’s a reason why they’re cheap, because they stand a good chance of still having substantial liquidity and profitability problems in the intermediate time frame as well as the distant future.
The one bank that stood out to me as one that has weathered this crisis pretty well, and seems to have a pretty conservative business model (the reason they stayed out of the subprime fiasco a lot more than other banks – one word, greed), is Hudson City Bancorp. This smaller bank has just posted record profits, perhaps because they have gained a reputation as being pretty solid in these uncertain times, but also because they have been voted the best managed bank.
It first came to my attention when I was reading an article in a newsletter from an investing service I subscribe to. It was one that looked like it warranted further research for me to invest in, so I started to research it and found that because of their more conservative approach to making loans to people for homes, they have made good profits and stayed in business, making mortgage loans and other loans, but not ones with substantial downside risks.
It doesn’t mean they will weather this storm without any scrapes, no banks will, but in comparison I really like the way they’ve done business and maintained profitability, unlike their larger competitors. Look where all that greed and risky lending got them – on the TARP program and itching to get out of it as soon as possible!
