Valley National Bank (VLY)

Regional banking company Valley National Bancorp (NASDAQ:VLY) met Wall Street’s revenue expectations in Q3 CY2025, with sales up 8.5% year on year to $511.1 million. Its non-GAAP profit of $0.28 per share was 9% 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 an impressive 9.5% compounded annual growth rate. Its growth beat the average banking company and shows its offerings resonate with customers.

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 significantly as its revenue was flat over the last two years. 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 grew its revenue by 8.5% year on year, and its $511.1 million of revenue was in line with Wall Street’s estimates.

Net interest income made up 88.1% 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.

Topline growth carries importance, but the overall profitability behind this expansion determines true value creation. For banks, the efficiency ratio captures this relationship by measuring non-interest expenses, including salaries, facilities, technology, and marketing, against total revenue.

Investors focus on efficiency ratio changes rather than absolute levels, understanding that expense structures vary by revenue mix. Counterintuitively, lower efficiency ratios indicate better performance since they represent lower costs relative to revenue.

Over the last five years, Valley National Bank’s efficiency ratio has increased by 7.2 percentage points, going from 48.1% to 54.8%. 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 Q3, Valley National Bank’s efficiency ratio was 53.4%, beating analysts’ expectations by 180.6 basis points (100 basis points = 1 percentage point). This result was 2.8 percentage points better than the same quarter last year.

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 53.8%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Valley National Bank, its EPS declined by 2.5% annually over the last five years while its revenue grew by 9.5%. 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 17% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q3, Valley National Bank reported adjusted EPS of $0.28, up from $0.18 in the same quarter last year. This print beat analysts’ estimates by 9%. Over the next 12 months, Wall Street expects Valley National Bank’s full-year EPS of $0.82 to grow 39.7%.

Banks are balance sheet-driven businesses because they generate earnings primarily through borrowing and lending. They’re also valued based on their balance sheet strength and ability to compound book value (another name for shareholders’ equity) over time.

When analyzing banks, tangible book value per share (TBVPS) takes precedence over many other metrics. This measure isolates genuine per-share value by removing intangible assets of debatable liquidation worth. EPS can become murky due to acquisition impacts or accounting flexibility around loan provisions, and TBVPS resists financial engineering manipulation.

Valley National Bank’s TBVPS grew at a decent 5.9% annual clip over the last five years. The last two years show a similar trajectory as TBVPS grew by 5.1% annually from $8.67 to $9.57 per share.

Over the next 12 months, Consensus estimates call for Valley National Bank’s TBVPS to grow by 7.3% to $10.27, mediocre 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 10.2%, 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%, respectable for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired.

It was good to see Valley National Bank beat analysts’ EPS expectations this quarter. We were also happy its tangible book value per share narrowly outperformed Wall Street’s estimates. On the other hand, its net interest income slightly missed. Zooming out, we think this was a mixed quarter. The market seemed to be hoping for more, and the stock traded down 1.9% to $9.93 immediately after reporting.

Updated: December 4, 2025 at 11:42 PM EST

Before making an investment decision, investors should account for Valley National Bank’s business fundamentals and valuation in addition to what happened in the latest quarter.

Valley National Bank falls short of our quality standards. First off, 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 declining EPS over the last five years makes it a less attractive asset to the public markets. 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 superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $13.75 on the company (compared to the current share price of $11.52).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.