KBRA Assigns Preferred Stock Rating and Affirms Existing Ratings to Valley National Bancorp
Key Credit Considerations
The ratings are supported by VLY’s long term track record with regard to credit quality performance. While KBRA recognizes certain risks within the company's current loan portfolio, more specifically, an elevated concentration in CRE (+440% of risk-based capital), VLY has historically outperformed the industry through various credit cycles, including the GFC when VLY’s NCO ratio peaked at 0.5% in 2011. With regards to VLY's CRE concentration, the company’s exposure to NYC rent regulated multi-family was moderate as of 1Q24, with around
Earnings have consistently tracked below rated peer averages, including an operating ROA that has fallen to 0.6% in 1H24, driven by NIM compression related to funding pressures, modestly higher credit costs (0.4% of average assets in 1H24) and limited fee-based revenues (~0.4% of average assets). However, while deposit costs were elevated (3.18% total cost of deposits for 2Q24), in part, due to the competitive dynamics in regions where the company operates in (namely
Rating Sensitivities
The Stable Outlook reflects KBRA's view that a rating change is unlikely in the medium term. However, deterioration in asset quality with credit costs tracking above expectations, coupled with continued earnings headwinds that lead to diminished profitability, or a measurable increase in wholesale funding usage brought on by unexpected deposit runoff could result in negative rating action.
To access rating and relevant documents, click here.
Methodologies
- Financial Institutions: Bank & Bank Holding Company Global Rating Methodology
- ESG Global Rating Methodology
Disclosures
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
About KBRA
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Analytical Contacts
+1 301-969-3174
jason.szelc@kbra.com
+1 646-731-3302
ian.jaffe@kbra.com
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joe.scott@kbra.com
Business Development Contact
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