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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 and EPS Surprise
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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