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Valley National (VLY) Gains Despite Q4 Earnings Miss, Cost Hike
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Valley National Bancorp’s (VLY - Free Report) fourth-quarter 2022 adjusted earnings per share of 35 cents missed the Zacks Consensus Estimate by a penny. The bottom line improved 20.7% on a year-over-year basis.
Results were hurt by an increase in expenses. Nevertheless, an improvement in net interest income (NII), driven by higher interest rates and loan growth, along with a rise in fee income, supported the results to some extent. A decline in provisions was another tailwind. Probably because of the positives, shares of the company gained 3.1% following the earnings release.
Net income available to common shareholders (GAAP basis) was $174 million or 34 cents per share, up from $111.9 million or 27 cents per share in the year-ago quarter.
Adjusted earnings per share of $1.31 for 2022 met the Zacks Consensus Estimate. The bottom line improved 12% on a year-over-year basis. Net income available to common shareholders (GAAP basis) was $555.7 million or $1.14 per share, up from $461.2 million or $1.12 per share recorded in 2021.
Revenues Improve, Expenses Rise
Total quarterly revenues were $518.6 million, jumping 46.7% year over year. The top line missed the Zacks Consensus Estimate of $529.6 million.
For 2022, revenues were $1.86 billion, up 36.5% from the previous year. However, the top line lagged the Zacks Consensus Estimate of $1.88 billion.
Quarterly NII (fully-taxable-equivalent or FTE basis) was $467.2 million, growing 47.9% year over year. This was driven by higher loan balances and rising interest rates.
The net interest margin (FTE basis) grew 34 basis points (bps) year over year to 3.57%.
Non-interest income grew 38.1% year over year to $52.8 million. The increase was largely driven by a rise in almost all fee income components, except for net gains on sales of loans and fees from loan servicing. In the reported quarter, the company recorded a net loss on securities transactions against a gain in the year-ago quarter.
Non-interest expenses of $266.2 million jumped 44.3% year over year. The rise was due to an increase in all cost components.
The efficiency ratio was 49.3%, down from 49.44% in the prior-year quarter. A fall in the efficiency ratio indicates an improvement in profitability.
As of Dec 31, 2022, total loans were $46.9 billion, up 3.8% sequentially. As of the same date, total deposits amounted to $47.6 billion, up from $45.3 billion at the end of the previous quarter.
Credit Quality: Mixed Bag
At the end of the reported quarter, total non-performing assets were $272 million, up 10.8% year over year.
However, the allowance for credit losses as a percentage of total loans was 1.03%, down from 1.10% in the year-ago quarter. Provision for credit losses for loans was $7.3 million, down 37.2% from the year-ago quarter.
Profitability Ratios Improve, Capital Ratios Deteriorate
At the end of the fourth quarter, the adjusted annualized return on average assets was 1.29%, up from 1.18% in the year-earlier quarter. Annualized return on average shareholders’ equity was 11.56%, up from 10.19%.
VLY's tangible common equity to tangible assets ratio was 7.45% as of Dec 31, 2022, down from 7.46% in the corresponding period of 2021. Tier 1 risk-based capital ratio was 9.46%, down from 9.54%. Also, the common equity tier 1 capital ratio of 9.01% declined from 9.06% as of Dec 31, 2021.
Our Take
Valley National’s organic growth trajectory, strategic acquisitions and digitization efforts will keep supporting financials. However, persistently increasing costs and a tough macroeconomic backdrop remain major concerns.
Valley National Bancorp Price, Consensus and EPS Surprise
Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2022 adjusted earnings of $1.30 per share surpassed the Zacks Consensus Estimate of $1.22. The bottom line reflects a rise of 25% from the prior-year quarter. Our estimate for earnings was $1.09.
BK’s results have been aided by a rise in net interest revenues. However, asset balances witnessed a decline, which was a negative. Higher expenses and lower fee revenues have hurt BK’s results to some extent.
Northern Trust Corporation’s (NTRS - Free Report) fourth-quarter 2022 adjusted earnings per share of $1.65 missed the Zacks Consensus Estimate of $1.81. Also, the bottom line declined 14% year over year.
Results were adversely impacted by a rising expense base, worsening credit quality, lower fee income and weak capital ratios. Yet, a rise in net interest income, driven by higher rates, acted as a tailwind for NTRS.
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Valley National (VLY) Gains Despite Q4 Earnings Miss, Cost Hike
Valley National Bancorp’s (VLY - Free Report) fourth-quarter 2022 adjusted earnings per share of 35 cents missed the Zacks Consensus Estimate by a penny. The bottom line improved 20.7% on a year-over-year basis.
Results were hurt by an increase in expenses. Nevertheless, an improvement in net interest income (NII), driven by higher interest rates and loan growth, along with a rise in fee income, supported the results to some extent. A decline in provisions was another tailwind. Probably because of the positives, shares of the company gained 3.1% following the earnings release.
Net income available to common shareholders (GAAP basis) was $174 million or 34 cents per share, up from $111.9 million or 27 cents per share in the year-ago quarter.
Adjusted earnings per share of $1.31 for 2022 met the Zacks Consensus Estimate. The bottom line improved 12% on a year-over-year basis. Net income available to common shareholders (GAAP basis) was $555.7 million or $1.14 per share, up from $461.2 million or $1.12 per share recorded in 2021.
Revenues Improve, Expenses Rise
Total quarterly revenues were $518.6 million, jumping 46.7% year over year. The top line missed the Zacks Consensus Estimate of $529.6 million.
For 2022, revenues were $1.86 billion, up 36.5% from the previous year. However, the top line lagged the Zacks Consensus Estimate of $1.88 billion.
Quarterly NII (fully-taxable-equivalent or FTE basis) was $467.2 million, growing 47.9% year over year. This was driven by higher loan balances and rising interest rates.
The net interest margin (FTE basis) grew 34 basis points (bps) year over year to 3.57%.
Non-interest income grew 38.1% year over year to $52.8 million. The increase was largely driven by a rise in almost all fee income components, except for net gains on sales of loans and fees from loan servicing. In the reported quarter, the company recorded a net loss on securities transactions against a gain in the year-ago quarter.
Non-interest expenses of $266.2 million jumped 44.3% year over year. The rise was due to an increase in all cost components.
The efficiency ratio was 49.3%, down from 49.44% in the prior-year quarter. A fall in the efficiency ratio indicates an improvement in profitability.
As of Dec 31, 2022, total loans were $46.9 billion, up 3.8% sequentially. As of the same date, total deposits amounted to $47.6 billion, up from $45.3 billion at the end of the previous quarter.
Credit Quality: Mixed Bag
At the end of the reported quarter, total non-performing assets were $272 million, up 10.8% year over year.
However, the allowance for credit losses as a percentage of total loans was 1.03%, down from 1.10% in the year-ago quarter. Provision for credit losses for loans was $7.3 million, down 37.2% from the year-ago quarter.
Profitability Ratios Improve, Capital Ratios Deteriorate
At the end of the fourth quarter, the adjusted annualized return on average assets was 1.29%, up from 1.18% in the year-earlier quarter. Annualized return on average shareholders’ equity was 11.56%, up from 10.19%.
VLY's tangible common equity to tangible assets ratio was 7.45% as of Dec 31, 2022, down from 7.46% in the corresponding period of 2021. Tier 1 risk-based capital ratio was 9.46%, down from 9.54%. Also, the common equity tier 1 capital ratio of 9.01% declined from 9.06% as of Dec 31, 2021.
Our Take
Valley National’s organic growth trajectory, strategic acquisitions and digitization efforts will keep supporting financials. However, 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 #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2022 adjusted earnings of $1.30 per share surpassed the Zacks Consensus Estimate of $1.22. The bottom line reflects a rise of 25% from the prior-year quarter. Our estimate for earnings was $1.09.
BK’s results have been aided by a rise in net interest revenues. However, asset balances witnessed a decline, which was a negative. Higher expenses and lower fee revenues have hurt BK’s results to some extent.
Northern Trust Corporation’s (NTRS - Free Report) fourth-quarter 2022 adjusted earnings per share of $1.65 missed the Zacks Consensus Estimate of $1.81. Also, the bottom line declined 14% year over year.
Results were adversely impacted by a rising expense base, worsening credit quality, lower fee income and weak capital ratios. Yet, a rise in net interest income, driven by higher rates, acted as a tailwind for NTRS.