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Valley National (VLY) Dips Despite Q3 Earnings Beat, Costs Up
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Valley National Bancorp’s (VLY - Free Report) third-quarter 2022 adjusted earnings per share of 35 cents beat the Zacks Consensus Estimate by a penny. The bottom line improved 16.7% on a year-over-year basis.
Results were aided by an improvement in net interest income (NII), driven by higher interest rates and loan growth. Also, growth in fee income and lower provisions supported the results. However, higher expenses hurt the results to some extent. Probably because of this, shares of the company lost 1.7% following the earnings release.
Net income available to common shareholders (GAAP basis) was $174.9 million or 34 cents per share, up from $119.4 million or 29 cents per share in the year-ago quarter.
Revenues Improve, Expenses Rise
Total revenues were $510.2 million, jumping 48.5% year over year. The top line surpassed the Zacks Consensus Estimate of $505.8 million.
NII (fully-taxable-equivalent or FTE basis) was $455.3 million, growing 50.9% year over year. This was driven by higher loan balances and rising interest rates.
The net interest margin (FTE basis) grew 45 basis points (bps) to 3.60%.
Non-interest income grew 32.4% year over year to $56.2 million. The increase was largely driven by a rise in almost all fee income components, except for net gains on securities transactions, net gains on sales of loans and bank-owned life insurance.
Non-interest expenses of $261.6 million jumped 49.6% year over year. The rise was due to an increase in all cost components.
The efficiency ratio was 49.76%, up from 49.16% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Sep 30, 2022, total loans were $45.2 billion, up 3.7% sequentially. As of the same date, total deposits amounted to $45.3 billion, growing 3.3% from the end of the previous quarter.
Credit Quality: Mixed Bag
At the end of the reported quarter, total non-performing assets were $294.8 million, up 14.4% year over year. The allowance for credit losses as a percentage of total loans was 1.10%, up from 1.09% in the year-ago quarter.
However, the provision for credit losses was $2 million, down 42.7% from the year-ago quarter.
Profitability Ratios Improve, Capital Ratios Deteriorate
At the end of the third quarter, annualized return on average assets was 1.32%, up from 1.20% in the year-earlier quarter. Annualized return on average shareholders’ equity was 11.60%, up from 10.41%.
VLY's tangible common equity to tangible assets ratio was 7.40% as of Sep 30, 2022, down from 7.96% in the corresponding period of 2021. Tier 1 risk-based capital ratio was 9.56%, down from 10.27%. Also, the common equity tier 1 capital ratio of 9.09% declined from 9.67% as of Sep 30, 2021.
Our Take
Valley National’s organic growth trajectory, strategic acquisitions and digitization efforts will keep supporting financials. Persistently increasing costs and a tough macroeconomic backdrop remain major concerns.
Valley National Bancorp Price, Consensus and EPS Surprise
SVB Financial Group’s third-quarter 2022 earnings per share of $7.21 surpassed the Zacks Consensus Estimate of $6.79. The bottom line reflects a rise of 15.5% from the prior-year quarter.
SIVB’s results were primarily aided by an improvement in NII, driven by higher rates and loan growth. However, a rise in expenses, lower non-interest income and higher provisions were the undermining factors.
BankUnited, Inc.’s (BKU - Free Report) third-quarter 2022 earnings per share of $1.12 outpaced the Zacks Consensus Estimate of $1.01. The bottom line also grew 19.1% from the prior-year quarter.
Results benefited from higher net interest income, a decent rise in loan balance and increasing rates. However, subdued fee income performance, a rise in expenses and an increase in credit costs acted as headwinds for BKU.
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Valley National (VLY) Dips Despite Q3 Earnings Beat, Costs Up
Valley National Bancorp’s (VLY - Free Report) third-quarter 2022 adjusted earnings per share of 35 cents beat the Zacks Consensus Estimate by a penny. The bottom line improved 16.7% on a year-over-year basis.
Results were aided by an improvement in net interest income (NII), driven by higher interest rates and loan growth. Also, growth in fee income and lower provisions supported the results. However, higher expenses hurt the results to some extent. Probably because of this, shares of the company lost 1.7% following the earnings release.
Net income available to common shareholders (GAAP basis) was $174.9 million or 34 cents per share, up from $119.4 million or 29 cents per share in the year-ago quarter.
Revenues Improve, Expenses Rise
Total revenues were $510.2 million, jumping 48.5% year over year. The top line surpassed the Zacks Consensus Estimate of $505.8 million.
NII (fully-taxable-equivalent or FTE basis) was $455.3 million, growing 50.9% year over year. This was driven by higher loan balances and rising interest rates.
The net interest margin (FTE basis) grew 45 basis points (bps) to 3.60%.
Non-interest income grew 32.4% year over year to $56.2 million. The increase was largely driven by a rise in almost all fee income components, except for net gains on securities transactions, net gains on sales of loans and bank-owned life insurance.
Non-interest expenses of $261.6 million jumped 49.6% year over year. The rise was due to an increase in all cost components.
The efficiency ratio was 49.76%, up from 49.16% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Sep 30, 2022, total loans were $45.2 billion, up 3.7% sequentially. As of the same date, total deposits amounted to $45.3 billion, growing 3.3% from the end of the previous quarter.
Credit Quality: Mixed Bag
At the end of the reported quarter, total non-performing assets were $294.8 million, up 14.4% year over year. The allowance for credit losses as a percentage of total loans was 1.10%, up from 1.09% in the year-ago quarter.
However, the provision for credit losses was $2 million, down 42.7% from the year-ago quarter.
Profitability Ratios Improve, Capital Ratios Deteriorate
At the end of the third quarter, annualized return on average assets was 1.32%, up from 1.20% in the year-earlier quarter. Annualized return on average shareholders’ equity was 11.60%, up from 10.41%.
VLY's tangible common equity to tangible assets ratio was 7.40% as of Sep 30, 2022, down from 7.96% in the corresponding period of 2021. Tier 1 risk-based capital ratio was 9.56%, down from 10.27%. Also, the common equity tier 1 capital ratio of 9.09% declined from 9.67% as of Sep 30, 2021.
Our Take
Valley National’s organic growth trajectory, strategic acquisitions and digitization efforts will keep supporting financials. Persistently increasing costs and a tough 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
SVB Financial Group’s third-quarter 2022 earnings per share of $7.21 surpassed the Zacks Consensus Estimate of $6.79. The bottom line reflects a rise of 15.5% from the prior-year quarter.
SIVB’s results were primarily aided by an improvement in NII, driven by higher rates and loan growth. However, a rise in expenses, lower non-interest income and higher provisions were the undermining factors.
BankUnited, Inc.’s (BKU - Free Report) third-quarter 2022 earnings per share of $1.12 outpaced the Zacks Consensus Estimate of $1.01. The bottom line also grew 19.1% from the prior-year quarter.
Results benefited from higher net interest income, a decent rise in loan balance and increasing rates. However, subdued fee income performance, a rise in expenses and an increase in credit costs acted as headwinds for BKU.