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This Bank Doesn’t Need a Bailout

When Cramer thinks banks, he’s focused on the net interest margin. That’s the difference between the interest they pay on deposits and what they charge for loans. With rates as low as they are – the Federal Reserve left them unchanged at between zero and 0.25% on Wednesday – financial firms, such as Hudson City Bancorp , are making big money.

Hudson City in particular might be on the verge of making a whole lot more. Cramer interviewed CEO Ronald Hermance on set today and discussed the firm’s $13.7 billion in certificate of deposits, which pay 3.1% and will mature over the next 12 months. Given that the going rate for CDs right now is between 2% and 2.25%, Hudson City should see a big improvement in its net interest margin very soon.

Hermance told Cramer that he has an 85% to 90% retention ratio in CDs and that the bank is on target for “a very similar amount” to the $2 billion in deposits received in the first quarter, but “at much lower rates.” That means more profits for Hudson City.

This trend is yet another reason Cramer is so bullish on Hudson City. Here’s a bank that escaped the credit crisis virtually unscathed and had no need for TARP money. The company also boosted its dividend when it reported its latest quarter and has been buying back stock to prop up shareholders during the downturn. Not to mention, the balance sheet is “pristine,” Hermance said, making this a solid company and stock to own.

Cramer covered all of this and more during his talk with Hermance. Watch the video for the full interview.

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