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Valley National (VLY) Stock Up 3.1% Despite Q2 Earnings Miss
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Valley National Bancorp’s (VLY - Free Report) second-quarter 2024 adjusted earnings per share of 13 cents lagged the Zacks Consensus Estimate of 20 cents by a considerable margin. The bottom line also plunged 53.6% on a year-over-year basis.
A substantial rise in provisions adversely impacted results. Also, lower net interest income (NII) and non-interest income were undermining factors. However, a sequential increase in loans and deposit balance and a fall in non-interest expenses acted as tailwinds. Perhaps this cheered investors as the VLY stock gained 3.1% yesterday.
Results excluded non-core income and charges. After considering these, net income was $70.4 million, down 49.4% from the year-ago quarter.
Revenues Fall, Expenses Down
Quarterly total revenues were $452.9 million, down 5.6% year over year. Also, the top line missed the Zacks Consensus Estimate of $458.7 million.
NII (fully-taxable-equivalent or FTE basis) was $403 million, declining 4.3%. This was due to higher interest expenses. Net interest margin (FTE basis) was 2.84%, down 10 basis points (bps).
Non-interest income was down 14.8% to $51.2 million. The fall was largely due to a decrease in capital markets and other income.
Non-interest expenses of $277.5 million decreased 1.9%. The fall was attributable to lower salary and employee benefits expenses and professional and legal fees. Meanwhile, adjusted expenses rose 1.2% to $270 million.
The adjusted efficiency ratio was 59.62%, up from 55.59% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Jun 30, 2024, total loans were $50.3 billion, up almost 1% sequentially. As of the same date, total deposits amounted to $50.1 billion, rising 2.1%.
Credit Quality Worsens
As of Jun 30, 2024, total non-performing assets were $312.9 million, up 22.2% year over year. Provision for credit losses for loans was $82.1 million, rising substantially from $6.1 million.
Allowance for credit losses as a percentage of total loans was 1.06%, up 14 bps from the year-ago quarter.
Profitability Ratios Deteriorate, Capital Ratios Solid
At the end of the second quarter, adjusted annualized return on average assets was 0.47%, down from 0.95% in the year-earlier quarter. Adjusted annualized return on average shareholders’ equity was 4.24%, down from 8.99%.
VLY's tangible common equity to tangible assets ratio was 7.52% as of Jun 30, 2024, down from 7.58% in the corresponding period of 2023. Tier 1 risk-based capital ratio was 9.99%, up from 9.72%. Also, the common equity tier 1 capital ratio of 9.55% was up from 9.29% as of Jun 30, 2023.
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. Further, the company’s huge commercial real estate loan exposure is worrisome. This, along with weakening asset quality, remains a major headwind.
Valley National Bancorp Price, Consensus and EPS Surprise
Zions Bancorporation’s (ZION - Free Report) second-quarter 2024 adjusted net earnings per share of $1.21 surpassed the Zacks Consensus Estimate of $1.10. Moreover, the bottom line increased 9% from the year-ago quarter.
Results were primarily aided by lower provisions and higher NII. Also, higher loans and deposits were other positives. However, a decline in non-interest income and a rise in adjusted non-interest expenses were major headwinds for ZION.
East West Bancorp, Inc.’s (EWBC - Free Report) second-quarter 2024 adjusted earnings per share of $2.07 surpassed the Zacks Consensus Estimate of $1.97. However, the bottom line declined 5.9% from the prior-year quarter.
EWBC’s results were primarily aided by an increase in adjusted non-interest income. Also, deposit and loan balances increased sequentially in the quarter. However, lower NII and higher adjusted non-interest expenses and provisions were the undermining factors.
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Valley National (VLY) Stock Up 3.1% Despite Q2 Earnings Miss
Valley National Bancorp’s (VLY - Free Report) second-quarter 2024 adjusted earnings per share of 13 cents lagged the Zacks Consensus Estimate of 20 cents by a considerable margin. The bottom line also plunged 53.6% on a year-over-year basis.
A substantial rise in provisions adversely impacted results. Also, lower net interest income (NII) and non-interest income were undermining factors. However, a sequential increase in loans and deposit balance and a fall in non-interest expenses acted as tailwinds. Perhaps this cheered investors as the VLY stock gained 3.1% yesterday.
Results excluded non-core income and charges. After considering these, net income was $70.4 million, down 49.4% from the year-ago quarter.
Revenues Fall, Expenses Down
Quarterly total revenues were $452.9 million, down 5.6% year over year. Also, the top line missed the Zacks Consensus Estimate of $458.7 million.
NII (fully-taxable-equivalent or FTE basis) was $403 million, declining 4.3%. This was due to higher interest expenses. Net interest margin (FTE basis) was 2.84%, down 10 basis points (bps).
Non-interest income was down 14.8% to $51.2 million. The fall was largely due to a decrease in capital markets and other income.
Non-interest expenses of $277.5 million decreased 1.9%. The fall was attributable to lower salary and employee benefits expenses and professional and legal fees. Meanwhile, adjusted expenses rose 1.2% to $270 million.
The adjusted efficiency ratio was 59.62%, up from 55.59% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Jun 30, 2024, total loans were $50.3 billion, up almost 1% sequentially. As of the same date, total deposits amounted to $50.1 billion, rising 2.1%.
Credit Quality Worsens
As of Jun 30, 2024, total non-performing assets were $312.9 million, up 22.2% year over year. Provision for credit losses for loans was $82.1 million, rising substantially from $6.1 million.
Allowance for credit losses as a percentage of total loans was 1.06%, up 14 bps from the year-ago quarter.
Profitability Ratios Deteriorate, Capital Ratios Solid
At the end of the second quarter, adjusted annualized return on average assets was 0.47%, down from 0.95% in the year-earlier quarter. Adjusted annualized return on average shareholders’ equity was 4.24%, down from 8.99%.
VLY's tangible common equity to tangible assets ratio was 7.52% as of Jun 30, 2024, down from 7.58% in the corresponding period of 2023. Tier 1 risk-based capital ratio was 9.99%, up from 9.72%. Also, the common equity tier 1 capital ratio of 9.55% was up from 9.29% as of Jun 30, 2023.
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. Further, the company’s huge commercial real estate loan exposure is worrisome. This, along with weakening asset quality, remains a major headwind.
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 #4 (Sell).
You can see the complete list of today's Zacks #1 Ranked (Strong Buy) stocks here.
Performance of Other Banks
Zions Bancorporation’s (ZION - Free Report) second-quarter 2024 adjusted net earnings per share of $1.21 surpassed the Zacks Consensus Estimate of $1.10. Moreover, the bottom line increased 9% from the year-ago quarter.
Results were primarily aided by lower provisions and higher NII. Also, higher loans and deposits were other positives. However, a decline in non-interest income and a rise in adjusted non-interest expenses were major headwinds for ZION.
East West Bancorp, Inc.’s (EWBC - Free Report) second-quarter 2024 adjusted earnings per share of $2.07 surpassed the Zacks Consensus Estimate of $1.97. However, the bottom line declined 5.9% from the prior-year quarter.
EWBC’s results were primarily aided by an increase in adjusted non-interest income. Also, deposit and loan balances increased sequentially in the quarter. However, lower NII and higher adjusted non-interest expenses and provisions were the undermining factors.