NEW YORK (TheStreet) -- Shares of Hudson City Bancorp  (HCBK) closed down 0.42% to $9.38 on Wednesday after Bloomberg reported that the U.S. government is investigating the company for potential discriminatory lending practices.

Two people familiar with the matter told Bloomberg that both the Justice Department and the Consumer Financial Protection Bureau (CFPB) are looking into whether the bank violated the Fair Housing Act. The site also reported that a preliminary CFPB review found that the bank denied loans to people in minority communities.

The investigation could place a new roadblock to the Hudson City Bancorp's sale to M&T Bank  (MTB) - Get Report, which was announced in 2012 but has faced numerous delays. The $3.7 billion deal was expected to close in the second quarter of 2013 but was delayed after the Federal Reserve noted concerns about M&T's anti-money laundering procedures.

M&T said this month that the proposed deal would not close by May 1 as scheduled because the Fed would not complete its review by that time.

Separately, TheStreet Ratings team rates HUDSON CITY BANCORP INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate HUDSON CITY BANCORP INC (HCBK) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Among the primary strengths of the company is its expanding profit margins over time. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.0%. Since the same quarter one year prior, revenues slightly dropped by 5.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • 42.64% is the gross profit margin for HUDSON CITY BANCORP INC which we consider to be strong. Regardless of HCBK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HCBK's net profit margin of 12.39% is significantly lower than the industry average.
  • Net operating cash flow has significantly decreased to $21.27 million or 75.15% when compared to the same quarter last year. Despite a decrease in cash flow HUDSON CITY BANCORP INC is still fairing well by exceeding its industry average cash flow growth rate of -121.56%.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Thrifts & Mortgage Finance industry and the overall market on the basis of return on equity, HUDSON CITY BANCORP INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • In its most recent trading session, HCBK has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Despite the stock's decline during the last year, it is still somewhat more expensive (in proportion to its earnings over the last year) than most other stocks in its industry. We feel, however, that other strengths this company displays offset this slight negative.
  • You can view the full analysis from the report here: HCBK Ratings Report