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Valley National (VLY) Q1 Earnings Miss on Higher Provisions
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Valley National Bancorp’s (VLY - Free Report) first-quarter 2023 adjusted earnings per share of 30 cents missed the Zacks Consensus Estimate of 33 cents. The bottom line, however, improved 7.1% on a year-over-year basis.
Results were hurt by an increase in expenses and provisions. 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 stable deposit balance was another tailwind.
Net income available to common shareholders (GAAP basis) was $142.7 million or 28 cents per share, up from $113.6 million or 27 cents per share in the year-ago quarter.
Revenues Improve, Expenses Rise
Total revenues were $490.3 million, jumping 37.4% year over year. The top line missed the Zacks Consensus Estimate of $518.6 million.
NII (fully-taxable-equivalent or FTE basis) was $437.5 million, growing 37.4%. This was driven by higher loan balances and rising interest rates. Net interest margin (FTE basis) was stable year over year at 3.16%.
Non-interest income surged 38.3% to $54.3 million. The increase was largely driven by a rise in almost all fee income components, except for net gains on sales of loans, fees from loan servicing and capital markets income.
Non-interest expenses of $272.2 million jumped 37.9%. The rise was due to an increase in all cost components.
The efficiency ratio was 53.79%, down from 53.18% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Mar 31, 2023, total loans were $48.7 billion, up 3.7% sequentially. As of the same date, total deposits amounted to $47.6 billion, relatively stable.
Credit Quality: Mixed Bag
As on Mar 31, 2023, total non-performing assets were $244.9 million, up 5.3% year over year. Provision for credit losses for loans was $14.4 million, rising substantially from $3.6 million.
However, the allowance for credit losses as a percentage of total loans was 0.95%, down from 1.07% in the year-ago quarter.
Profitability Ratios Solid, Capital Ratios Deteriorate
At the end of the first quarter, the adjusted annualized return on average assets was 1.03%, down from 1.10% in the year-earlier quarter. Annualized return on average shareholders’ equity was 9.60%, up from 9.43%.
VLY's tangible common equity to tangible assets ratio was 6.82% as of Mar 31, 2023, down from 7.96% in the corresponding period of 2021. Tier 1 risk-based capital ratio was 9.46%, down from 10.27%. Also, the common equity tier 1 capital ratio of 9.02% declined from 9.67% as of Mar 31, 2022.
Our Take
Valley National’s organic growth trajectory, strategic acquisitions and digitization efforts will keep supporting financials. However, persistently increasing costs and a challenging macroeconomic backdrop remain major concerns.
Valley National Bancorp Price, Consensus and EPS Surprise
Bank OZK’s (OZK - Free Report) first-quarter 2023 earnings per share of $1.41 missed the Zacks Consensus Estimate of $1.43. The bottom line, however, reflects a rise of 38.2% from the year-earlier quarter. We had projected earnings of $1.39 per share.
Results were adversely impacted by lower non-interest income, higher expenses and a rise in provision for credit losses on worsening economic outlook. Yet, there was an improvement in net interest income, driven by higher loan balances and rising rates. Also, OZK witnessed a rise in deposit balance during the quarter.
Hancock Whitney Corporation’s (HWC - Free Report) first-quarter 2023 earnings of $1.45 per share met the Zacks Consensus Estimate. The bottom line rose 3.6% from the prior-year quarter. Our estimate for earnings was $1.38 per share.
HWC’s results benefited from higher NII, a rise in loan balance and increasing interest rates. However, lower non-interest income, higher expenses and a rise in provisions were concerning.
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Valley National (VLY) Q1 Earnings Miss on Higher Provisions
Valley National Bancorp’s (VLY - Free Report) first-quarter 2023 adjusted earnings per share of 30 cents missed the Zacks Consensus Estimate of 33 cents. The bottom line, however, improved 7.1% on a year-over-year basis.
Results were hurt by an increase in expenses and provisions. 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 stable deposit balance was another tailwind.
Net income available to common shareholders (GAAP basis) was $142.7 million or 28 cents per share, up from $113.6 million or 27 cents per share in the year-ago quarter.
Revenues Improve, Expenses Rise
Total revenues were $490.3 million, jumping 37.4% year over year. The top line missed the Zacks Consensus Estimate of $518.6 million.
NII (fully-taxable-equivalent or FTE basis) was $437.5 million, growing 37.4%. This was driven by higher loan balances and rising interest rates. Net interest margin (FTE basis) was stable year over year at 3.16%.
Non-interest income surged 38.3% to $54.3 million. The increase was largely driven by a rise in almost all fee income components, except for net gains on sales of loans, fees from loan servicing and capital markets income.
Non-interest expenses of $272.2 million jumped 37.9%. The rise was due to an increase in all cost components.
The efficiency ratio was 53.79%, down from 53.18% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Mar 31, 2023, total loans were $48.7 billion, up 3.7% sequentially. As of the same date, total deposits amounted to $47.6 billion, relatively stable.
Credit Quality: Mixed Bag
As on Mar 31, 2023, total non-performing assets were $244.9 million, up 5.3% year over year. Provision for credit losses for loans was $14.4 million, rising substantially from $3.6 million.
However, the allowance for credit losses as a percentage of total loans was 0.95%, down from 1.07% in the year-ago quarter.
Profitability Ratios Solid, Capital Ratios Deteriorate
At the end of the first quarter, the adjusted annualized return on average assets was 1.03%, down from 1.10% in the year-earlier quarter. Annualized return on average shareholders’ equity was 9.60%, up from 9.43%.
VLY's tangible common equity to tangible assets ratio was 6.82% as of Mar 31, 2023, down from 7.96% in the corresponding period of 2021. Tier 1 risk-based capital ratio was 9.46%, down from 10.27%. Also, the common equity tier 1 capital ratio of 9.02% declined from 9.67% as of Mar 31, 2022.
Our Take
Valley National’s organic growth trajectory, strategic acquisitions and digitization efforts will keep supporting 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 #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Bank OZK’s (OZK - Free Report) first-quarter 2023 earnings per share of $1.41 missed the Zacks Consensus Estimate of $1.43. The bottom line, however, reflects a rise of 38.2% from the year-earlier quarter. We had projected earnings of $1.39 per share.
Results were adversely impacted by lower non-interest income, higher expenses and a rise in provision for credit losses on worsening economic outlook. Yet, there was an improvement in net interest income, driven by higher loan balances and rising rates. Also, OZK witnessed a rise in deposit balance during the quarter.
Hancock Whitney Corporation’s (HWC - Free Report) first-quarter 2023 earnings of $1.45 per share met the Zacks Consensus Estimate. The bottom line rose 3.6% from the prior-year quarter. Our estimate for earnings was $1.38 per share.
HWC’s results benefited from higher NII, a rise in loan balance and increasing interest rates. However, lower non-interest income, higher expenses and a rise in provisions were concerning.