NJ thrifts suffer as housing turns soft

From the Record:

Mortgage woes hurt thrifts

Northern New Jersey thrifts, which rode the home-buying and refinancing booms to record profits in the early 2000s, are now proving the adage that what goes up comes down.

Shares in Hudson City Bancorp Inc., which increased as much as eightfold from their initial price from 1999 to the end of 2004, have slipped 17 percent this year at the largest New Jersey-based thrift. The stock hit a 52-week-low of $11.58 on Friday as demand for loans has fallen and high short-term interest rates have translated to high deposit costs and slim profit margins.

Shares in other local thrifts, including Provident Financial Services Inc., Kearny Financial Corp., Clifton Savings Bancorp Inc. and Oritani Financial Corp., have all seen double-digit declines this year.

“The weakness in the thrift sector is driven by the slowdown in the mortgage market,” said Collyn Gilbert, an analyst at Stifel Nicolaus & Co.’s Florham Park office on Friday.

The mortgage market is expected to continue to be weak at least through the rest of this year.

“It’s tough,” she said. “Some [thrifts] are hunkering down and reining in growth, but there are not a lot of levers they can push.”

Thrifts traditionally rely more on residential mortgage lending than commercial banks, so their financial performance tends to suffer more when the housing market turns soft.

The SNL Thrift Index, which includes 167 thrifts around the country, was down 12 percent for the year as of Friday. The KBW Bank Index, comprised of large commercial banks, has fallen 5 percent in 2007.

Among the few bright spots for thrifts is that the interest-rate environment has begun to improve and they’re feeling less competition from the finance companies caught up in the sub-prime mortgage shakeout, said Gerard Cassidy, analyst at RBC Capital Markets in Portland, Maine.

“There is a bunch of capacity coming out of the business,” he said

This entry was posted in New Jersey Real Estate, Risky Lending. Bookmark the permalink.