Valley National (VLY) Gains 1.7% as Q3 Earnings Meet Estimates
Shares of Valley National Bancorp VLY gained 1.7% following the release of its third-quarter 2023 results. Adjusted earnings per share of 26 cents met the Zacks Consensus Estimate. The bottom line, however, declined 25.7% on a year-over-year basis.
Results benefited from higher non-interest income and decent loans and deposit growth. On the other hand, a decline in net interest income (NII) on a significant rise in interest expenses, higher expenses and a substantial rise in provisions acted as spoilsports.
Net income available to common shareholders (GAAP basis) was $137.2 million or 27 cents per share, down from $174.9 million or 34 cents per share in the year-ago quarter.
Revenues Fall, Expenses Rise
Total revenues were $471.08 million, down 7.7% year over year. The top line, however, marginally missed the Zacks Consensus Estimate of $471.14 million.
NII (fully-taxable-equivalent or FTE basis) was $413.7 million, declining 9.1%. This was due to higher interest expenses. Net interest margin (FTE basis) was 2.91%, down 69 basis points.
Non-interest income grew 4.4% to $58.7 million. The increase was largely driven by a rise in wealth management and trust fees, service charges on deposit accounts and gain on sale of assets.
Non-interest expenses of $267.1 million increased 2.1%. The rise was due to higher salary and employee benefits expenses, FDIC insurance assessment costs and other expenses.
The efficiency ratio was 56.72%, up from 49.76% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Sep 30, 2023, total loans were $50.1 billion, up marginally sequentially. As of the same date, total deposits amounted to $49.9 billion, rising slightly.
Credit Quality: Mixed Bag
As of Sep 30, 2023, total non-performing assets were $260.3 million, down 11.7% year over year. Also, allowance for credit losses as a percentage of total loans was 0.92%, down from 1.10% in the year-ago quarter.
Provision for credit losses for loans was $9.1 million, rising substantially from $2 million.
Profitability Ratios Deteriorate, Capital Ratios Improve
At the end of the third quarter, adjusted annualized return on average assets was 0.89%, down from 1.32% in the year-earlier quarter. Annualized return on average shareholders’ equity was 8.26%, down from 11.60%.
VLY's tangible common equity to tangible assets ratio was 7.40% as of Sep 30, 2023, up from 6.82% in the corresponding period of 2022. Tier 1 risk-based capital ratio was 9.64%, up from 9.46%. Also, the common equity tier 1 capital ratio of 9.21% declined from 9.02% as of Sep 30, 2022.
Our Take
Valley National’s organic growth trajectory, strategic acquisitions and digitization efforts will support financials. However, persistently increasing costs and a challenging macroeconomic backdrop remain major concerns.
Valley National Bancorp Price, Consensus and EPS Surprise
Valley National Bancorp price-consensus-eps-surprise-chart | Valley National Bancorp Quote
Valley National currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Associated Banc-Corp’s ASB third-quarter 2023 earnings of 53 cents per share met the Zacks Consensus Estimate. The bottom line declined 14.5% from the prior-year quarter.
In the reported quarter, ASB recorded a decline in NII and non-interest income. Also, expenses increased marginally, which, along with higher provisions, was a negative. However, a sequential rise in loan balances aided the results to some extent.
BankUnited, Inc. BKU third-quarter 2023 earnings per share of 63 cents missed the Zacks Consensus Estimate of 71 cents. The bottom line also declined 43.8% from the prior-year quarter.
BKU’s results were adversely impacted by an increase in non-interest expenses, lower deposit and loan balance and a decline in NII. However, higher non-interest income acted as a tailwind.
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