Hudson City Bancorp CEO on Company's Success, Glass-Steagall Act

This morning on The Opening Bell, I was joined by Ron Hermance, Hudson City Bancorp’s chairman & CEO. This is a company that is firing on all cylinders. It was the best-performing bank stock in the S&P 500 last year, up almost 8% and yesterday they reported another great quarter. The company has paid a dividend every quarter since the year it went public in 1999.

This morning, I learned a tremendous amount about Ron's business. I have interviewed Ron probably 3 to 4 times over the past couple of years, but today was different. He explained why they’ve been successful in this very challenging climate for banks. Listen to this: “The key to our success is keeping costs under control. Our operating costs are 19 cents for every dollar-generated in revenue. Around the world, that cost is 58 cents. We have 131 branches in New York, New Jersey and Connecticut, with 7 to 8 employees per branch with approximately $170 million in average deposits per branch while the average branch in the tri-state area has $67 million in deposits.”

When I asked Ron about his interest in purchasing a bank or a bank’s assets through the FDIC he said, “We look at every single one. They (the FDIC) sends every bank confidential information to evaluate them (problem banks). We have seen a few we like but they have not made geographic sense. We’re still looking and we are open to buying in the market too.”

Finally, I asked Ron about Volcker’s call to take another look at Glass-Steagall and whether or not it should be reinstated. Remember, Glass-Steagall, when it was first implemented, mandated that commercial and investment banks had to remain separate entities. When it was repealed in 1999, it opened the door for consolidation of commercial banking with investment banking, insurance and money management. I asked Ron if he supports Volcker’s assertion that we need to reinstate Glass-Steagall and separate banks from investment banks. Ron said, “I absolutely agree with him. Glass Steagall’s repeal was the beginning of the end. The department store financial services companies are too hard to measure for analysts and for regulators. They can’t properly figure out the businesses and separate out the banking and deposits.”

Check out our interview. Ron had excellent points.