Banks that rely on spread income, and particularly those
with expensive funding sources, have had their challenges in recent
years and that includes Valley National (NYSE:VLY).
On the plus side, this conservatively-run bank has a well-deserved
reputation for strong underwriting and a willingness to turn over rocks
and sift through the couch cushions to find ways to cut costs without
compromising the long-term viability of the franchise. What's more, this
company has shown that it can (and will) do deals, and it pays a
healthy dividend relative to its peer group.
In this
new operating environment for banks, "fairly valued" is the new cheap,
and Valley National doesn't look all that overpriced to me. That said,
the company is not exactly flush with capital at the moment, and I think
it's fair to be concerned that future M&A could be more dilutive.
Likewise, I have some concerns about the bank's positioning with respect
to its loan book and its capital, but tailwinds like a lower tax rate
and a less stringent regulatory environment could both help.
Read more here:
Valley National's Slow Climb Back Up The Mountain
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