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Valley National (VLY) Down 2.5% on Q2 Earnings & Revenue Miss
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Shares of Valley National Bancorp (VLY - Free Report) lost 2.5% following the release of its lower-than-expected second-quarter 2023 results. Adjusted earnings per share of 28 cents missed the Zacks Consensus Estimate by a penny. The bottom line also declined 12.5% on a year-over-year basis.
Results were hurt by a significant rise in interest expenses, which affected the company’s net interest income. Further, capital and profitability ratios worsened. On the other hand, lower expenses, a rise in non-interest income and decent loans and deposit growth were tailwinds. Also, credit quality improved during the quarter.
Net income available to common shareholders (GAAP basis) was $139.1 million or 27 cents per share, up from $96.4 million or 18 cents per share in the year-ago quarter.
Revenues Improve, Expenses Decline
Total revenues were $479.8 million, rising marginally year over year. The top line, however, missed the Zacks Consensus Estimate of $491.9 million.
NII (fully-taxable-equivalent or FTE basis) was $421.3 million, growing slightly. This was driven by higher loan balances and rising interest rates, majorly offset by a substantial rise in interest expenses. Net interest margin (FTE basis) was 2.94%, down 49 basis points.
Non-interest income grew 2.6% to $60.1 million. The increase was largely driven by a rise in wealth management and trust fees and insurance commissions.
Non-interest expenses of $283 million declined 5.6%. The fall was due to a decrease in all cost components except net occupancy expenses, FDIC insurance assessment, amortization of tax credit investments and other expenses.
The efficiency ratio was 55.59%, up from 50.78% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Jun 30, 2023, total loans were $49.9 billion, up 2.5% sequentially. As of the same date, total deposits amounted to $49.6 billion, rising 4.3%.
Credit Quality Improves
As of Jun 30, 2023, total non-performing assets were $256.1 million, down 18.6% year over year.
Provision for credit losses for loans was $6.1 million, plunging substantially from $44 million. Also, the allowance for credit losses as a percentage of total loans was 0.92%, down from 1.13% in the year-ago quarter.
Profitability & Capital Ratios Deteriorate
At the end of the second quarter, adjusted annualized return on average assets was 0.95%, down from 1.25% in the year-earlier quarter. Annualized return on average shareholders’ equity was 8.99%, down from 10.63%.
VLY's tangible common equity to tangible assets ratio was 7.24% as of Jun 30, 2023, down from 7.46% in the corresponding period of 2022. Tier 1 risk-based capital ratio was 9.47%, down from 9.54%. Also, the common equity tier 1 capital ratio of 9.03% declined from 9.06% as of Jun 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
BankUnited, Inc. (BKU - Free Report) second-quarter 2023 earnings per share of 78 cents missed the Zacks Consensus Estimate by a penny. The bottom line also declined 4.9% from the prior-year quarter.
BKU's results were adversely impacted by an increase in operating expenses, lower deposit and loan balance and a decline in NII. However, higher non-interest income and lower provisions for credit losses acted as tailwinds.
Prosperity Bancshares Inc.’s (PB - Free Report) second-quarter 2023 earnings per share of 94 cents missed the Zacks Consensus Estimate of $1.19. The bottom line decreased 32.9% from the prior-year quarter.
PB’s results were hurt by an increase in expenses and a fall in net revenues. The company also reported rise in provisions for credit losses. However, higher fee income and increased loan balances were the major tailwinds.
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Valley National (VLY) Down 2.5% on Q2 Earnings & Revenue Miss
Shares of Valley National Bancorp (VLY - Free Report) lost 2.5% following the release of its lower-than-expected second-quarter 2023 results. Adjusted earnings per share of 28 cents missed the Zacks Consensus Estimate by a penny. The bottom line also declined 12.5% on a year-over-year basis.
Results were hurt by a significant rise in interest expenses, which affected the company’s net interest income. Further, capital and profitability ratios worsened. On the other hand, lower expenses, a rise in non-interest income and decent loans and deposit growth were tailwinds. Also, credit quality improved during the quarter.
Net income available to common shareholders (GAAP basis) was $139.1 million or 27 cents per share, up from $96.4 million or 18 cents per share in the year-ago quarter.
Revenues Improve, Expenses Decline
Total revenues were $479.8 million, rising marginally year over year. The top line, however, missed the Zacks Consensus Estimate of $491.9 million.
NII (fully-taxable-equivalent or FTE basis) was $421.3 million, growing slightly. This was driven by higher loan balances and rising interest rates, majorly offset by a substantial rise in interest expenses. Net interest margin (FTE basis) was 2.94%, down 49 basis points.
Non-interest income grew 2.6% to $60.1 million. The increase was largely driven by a rise in wealth management and trust fees and insurance commissions.
Non-interest expenses of $283 million declined 5.6%. The fall was due to a decrease in all cost components except net occupancy expenses, FDIC insurance assessment, amortization of tax credit investments and other expenses.
The efficiency ratio was 55.59%, up from 50.78% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Jun 30, 2023, total loans were $49.9 billion, up 2.5% sequentially. As of the same date, total deposits amounted to $49.6 billion, rising 4.3%.
Credit Quality Improves
As of Jun 30, 2023, total non-performing assets were $256.1 million, down 18.6% year over year.
Provision for credit losses for loans was $6.1 million, plunging substantially from $44 million. Also, the allowance for credit losses as a percentage of total loans was 0.92%, down from 1.13% in the year-ago quarter.
Profitability & Capital Ratios Deteriorate
At the end of the second quarter, adjusted annualized return on average assets was 0.95%, down from 1.25% in the year-earlier quarter. Annualized return on average shareholders’ equity was 8.99%, down from 10.63%.
VLY's tangible common equity to tangible assets ratio was 7.24% as of Jun 30, 2023, down from 7.46% in the corresponding period of 2022. Tier 1 risk-based capital ratio was 9.47%, down from 9.54%. Also, the common equity tier 1 capital ratio of 9.03% declined from 9.06% as of Jun 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-eps-surprise-chart | Valley National Bancorp Quote
Valley National currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
BankUnited, Inc. (BKU - Free Report) second-quarter 2023 earnings per share of 78 cents missed the Zacks Consensus Estimate by a penny. The bottom line also declined 4.9% from the prior-year quarter.
BKU's results were adversely impacted by an increase in operating expenses, lower deposit and loan balance and a decline in NII. However, higher non-interest income and lower provisions for credit losses acted as tailwinds.
Prosperity Bancshares Inc.’s (PB - Free Report) second-quarter 2023 earnings per share of 94 cents missed the Zacks Consensus Estimate of $1.19. The bottom line decreased 32.9% from the prior-year quarter.
PB’s results were hurt by an increase in expenses and a fall in net revenues. The company also reported rise in provisions for credit losses. However, higher fee income and increased loan balances were the major tailwinds.