Valley National Bank Trying To Turn Over A New Leaf

Valley National Bank (NASDAQ:VLY) is still trying to put a lackluster performance and total return history behind it. Since a CEO change at the end of 2017, the company has made meaningful progress on operating efficiency and has seen some acceleration in tangible book value growth, but challenges remain. Despite a fairly strong return on tangible common equity, the bank’s acquisitive behavior continues to sit poorly with many analysts and investors, and the company’s efforts to drive a more balanced mix of organic and acquired growth are still relatively new and unproven.

I like the strategy Valley National is following now, and I think the Bank Leumi deal may be a better long-term opportunity for the company than is reflected in the share price, as I think a larger private banking operation (somewhat similar to First Republic (FRC)) and a larger national specialty commercial lending franchise (somewhat similar to First Citizens (FCNCA)) can both create value. Still, I’m worried about the short-term profit outlook given the bank’s need to raise higher-cost deposits and the Street’s penchant for short-term thinking. Valuation is interesting at today’s level but there are a lot of banks trading at “interesting” valuations, and sentiment remains a concern for me.

 

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Valley National Bank Trying To Turn Over A New Leaf