The current wave of low interest rates continues to batter banks' ability to grow their top lines, and Hudson City Bancorp (Nasdaq: HCBK) is no exception. A considerable fall in revenue, coupled with the repayment of $4.3 billion in debt, led to Hudson's disappointing quarterly loss.

The quarter past
Low interest rates, an unrelenting slump in the housing market, and higher prepayment rates shrank Hudson's top line by a staggering 31% to $184.9 million, as net interest income went down 18%. Poor top- and bottom-line results took the sheen off Hudson's lower provisions for credit losses.

The company posted a loss of $360.5 million from a profit of $121.2 million a year ago. A month ago, Hudson had announced its intentions to extinguish a significant portion of its debt. Along with a major reduction in the bank's liabilities, the repayment caused Hudson's after-tax profit to fall by $416.8 million. But according to Hudson's CEO, shares rose because investors "applauded" the move.

Creditworthy
Hudson closed 2011 with a significant improvement in its credit quality. Allowances for bad loans declined by a sizeable 44% to $25 million, which can be partly credited to a 19% fall in net charge-offs from the year-ago period. Though less than ideal, the bank's 8.8% tier 1 leverage ratio has been slowly improving.

Hudson's efforts to restructure its self-described "expensive debt" definitely gives it a strong start for 2012 and will help the company improve margins. However, that does not negate the fact that low interest rates along with a sluggish economy will continue to weigh on the top line.

Of course, these low interest rates are what is necessary to invigorate the economy and drive loan growth. To stay up to date on all the workings of Hudson City in 2012, simply add the stock to your own personalized watchlist. It's free.

Fool contributor Shubh Datta doesn't own any shares in the companies listed above. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.