This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

10 Efficient, Stable and Profitable U.S. Banks

NEW YORK ( TheStreet) -- TheStreet's list of the 10 actively-traded bank and thrift holding companies operating with the greatest efficiency includes some high flyers, but also several bargains trading just above book value.

Even though it seems that every bank provides the same commodity services these days, it's not really true. There's a great variety of business models for banks and savings & loan associations, and the ones operating most efficiently can take extremely conservative approaches to lending and still turn a decent profit.

A case in point is Hudson City Bancorp (HCBK - Get Report), which according to SNL Financial's analysis of Securities and Exchange Commission filings, operates with the lowest overhead expense - as a percentage of operating revenue - among 949 publicly traded U.S. bank and thrift holding companies. (That list excludes shares traded on the Pink Sheets).

Although Hudson City's third-quarter net interest margin - essentially the difference between its average yield on loans and investments and its average cost of funds -- was a very low 1.95%, the company's annualized return on average assets (ROA) was 0.82%. In comparison, the aggregate net interest margin for all U.S. banks and thrifts during the third quarter was 3.75%, but the aggregate return on assets was only 0.44%, according to the Federal Deposit Insurance Corp..

Despite a declining margin, Hudson City has maintained decent earnings performance because of very strong loan quality and high operating efficiency. SNL defines a bank's efficiency ratio as its noninterest expense (before expenses on foreclosed property, amortization of intangibles and goodwill impairments) divided by its revenue (excluding securities gains and nonrecurring items). Lower is better, and Hudson City's third-quarter efficiency ratio of 22.55 was the lowest among the nearly 1,000 publicly traded banks and thrifts we looked at.

Narrowing down the list to include only actively traded companies with average daily trading volume of at least 50,000 shares, the following list of 10 holding companies with the lowest efficiency ratios is concentrated on both coasts, with thrifts making up the majority. Analyst sentiment is strong for half of the group, as several of the names appear to be undervalued.

By selecting this group based only on the efficiency ratio, we have excluded unprofitable banks. In fact, half of the group achieved a third-quarter ROA exceeding 1%, while the entire group beat the industry aggregate.

Terms

For each of the 10 banks discussed on the following pages, we'll be looking at capital strength, earnings quality and asset quality. For an explanation of those terms you can click on the box below.

1 of 11

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
DCOM $16.20 0.00%
HCBK $9.63 0.00%
ISBC $12.02 0.00%
ORIT $14.60 0.00%
WIBC $11.07 0.00%

Markets

DOW 18,232.02 -53.72 -0.29%
S&P 500 2,126.06 -4.76 -0.22%
NASDAQ 5,089.3620 -1.4320 -0.03%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs