Valley National Bank (VLY)

Regional banking company Valley National Bancorp (NASDAQ:VLY) reported Q4 CY2025 results exceeding the market’s revenue expectations, with sales up 12% year on year to $541.2 million. Its non-GAAP profit of $0.31 per share was 7.1% above analysts’ consensus estimates.

Company Overview

Tracing its roots back to 1927 during the economic boom before the Great Depression, Valley National Bancorp (NASDAQGS:VLY) operates Valley National Bank, providing commercial, consumer, and wealth management banking services across several states.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Valley National Bancorp competes with other regional banks operating in its markets, including M&T Bank (NYSE:MTB), Citizens Financial Group (NYSE:CFG), and New York Community Bancorp (NYSE:NYCB), as well as larger national institutions like JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC).

Net interest income and and fee-based revenue are the two pillars supporting bank earnings. The former captures profit from the gap between lending rates and deposit costs, while the latter encompasses charges for banking services, credit products, wealth management, and trading activities. Over the last five years, Valley National Bank grew its revenue at a mediocre 9.2% compounded annual growth rate. This was below our standard for the banking sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Valley National Bank’s recent performance shows its demand has slowed as its annualized revenue growth of 3.7% over the last two years was below its five-year trend. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Valley National Bank reported year-on-year revenue growth of 12%, and its $541.2 million of revenue exceeded Wall Street’s estimates by 2.9%.

Net interest income made up 87.9% of the company’s total revenue during the last five years, meaning Valley National Bank barely relies on non-interest income to drive its overall growth.

Net interest income commands greater market attention due to its reliability and consistency, whereas non-interest income is often seen as lower-quality revenue that lacks the same dependable characteristics.

The underlying profitability of top-line growth determines the actual bottom-line impact. Banking institutions measure this dynamic using the efficiency ratio, which is calculated by dividing non-interest expenses like personnel, facilities, technology, and marketing by total revenue.

Markets understand that a bank’s expense base depends on its revenue mix and what mostly drives share price performance is the change in this ratio, rather than its absolute value. It’s somewhat counterintuitive, but a lower efficiency ratio is better.

Over the last five years, Valley National Bank’s efficiency ratio has increased by 6.9 percentage points, going from 48.1% to 54.5%. Said differently, the company’s expenses have increased at a faster rate than revenue, which usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

In Q4, Valley National Bank’s efficiency ratio was 53.5%, falling short of analysts’ expectations by 31.6 basis points (100 basis points = 1 percentage point).

For the next 12 months, Wall Street expects Valley National Bank to rein in some of its expenses as it anticipates an efficiency ratio of 51.7%.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Valley National Bank’s flat EPS over the last five years was below its 9.2% annualized revenue growth. However, its efficiency ratio actually improved during this time, telling us that non-fundamental factors such as taxes affected its ultimate earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Valley National Bank, its two-year annual EPS declines of 2.9% show its recent history was to blame for its underperformance over the last five years. These results were bad no matter how you slice the data.

In Q4, Valley National Bank reported adjusted EPS of $0.31, up from $0.13 in the same quarter last year. This print beat analysts’ estimates by 7.1%. Over the next 12 months, Wall Street expects Valley National Bank’s full-year EPS of $1 to grow 24.1%.

Banks profit by intermediating between depositors and borrowers, making them fundamentally balance sheet-driven enterprises. Market participants emphasize balance sheet quality and sustained book value growth when evaluating these institutions.

This explains why tangible book value per share (TBVPS) stands as the premier banking metric. TBVPS strips away questionable intangible assets, revealing concrete per-share net worth that investors can trust. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.

Valley National Bank’s TBVPS grew at a solid 6.2% annual clip over the last five years. The last two years show a similar trajectory as TBVPS grew by 5.6% annually from $8.83 to $9.85 per share.

Over the next 12 months, Consensus estimates call for Valley National Bank’s TBVPS to grow by 7.6% to $10.60, paltry growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Valley National Bank has averaged a Tier 1 capital ratio of 10.4%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, quantifies bank profitability relative to shareholder equity - an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.

Over the last five years, Valley National Bank has averaged an ROE of 8.1%, uninspiring for a company operating in a sector where the average shakes out around 7.5%.

We enjoyed seeing Valley National Bank beat analysts’ revenue expectations this quarter. We were also happy its tangible book value per share narrowly outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock remained flat at $12.35 immediately after reporting.

Updated: January 29, 2026 at 8:35 AM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Valley National Bank, you should also grasp the company’s longer-term business quality and valuation.

We see the value of companies driving economic growth, but in the case of Valley National Bank, we’re out. For starters, its revenue growth was mediocre over the last five years, and analysts don’t see anything changing over the next 12 months. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its weak EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders. On top of that, its net interest margin limits its operating profit potential compared to other banks that can earn more, all else equal..

Valley National Bank’s P/B ratio based on the next 12 months is 0.9x. This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $14.04 on the company (compared to the current share price of $12.35).