Valley National Bancorp :VLY-US: Earnings Analysis: Q2, 2016 By the Numbers : August 8, 2016

Valley National Bancorp reports financial results for the quarter ended June 30, 2016.

We analyze the earnings along side the following peers of Valley National Bancorp – Sun Bancorp, Inc., Lakeland Bancorp, Inc., M&T Bank Corporation, Peapack-Gladstone Financial Corporation, Sussex Bancorp, Two River Bancorp, Universal Electronics Inc., Unity Bancorp, Inc., Parke Bancorp, Inc. and Sharp Corporation (SNBC-US, LBAI-US, MTB-US, PGC-US, SBBX-US, TRCB-US, UEIC-US, UNTY-US, PKBK-US and SHCAF-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 175.01 million, Net Earnings of USD 39.03 million.
  • Net interest income margins narrowed from 87.33% to 86.54% compared to the same period last year.
  • Net loan assets changed 14.01% compared to same period last year and 2.25% from previous period, total deposits changed 14.13% compared to same period last year and -0.32% from previous period.
  • Earnings growth from operating margin improvements as well as from one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2015-06-30 2015-09-30 2015-12-31 2016-03-31 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 155.92 155.42 169.23 169.6 175.01
Revenue Growth (%YOY) 16.5 19.84 16.37 12.76 12.24
Earnings (mil) 31.99 35.95 4.67 36.19 39.03
Earnings Growth (%YOY) 8.37 29.88 -81.42 19.27 21.99
Net Margin (%) 20.52 23.13 2.76 21.34 22.3
EPS 0.14 0.15 0.01 0.14 0.15
Return on Equity (%) 6.64 6.82 0.55 6.22 6.69
Return on Assets (%) 0.67 0.74 0.09 0.67 0.72

Access our Ratings and Scores for Valley National Bancorp

Market Share Versus Profits

Revenues History
Earnings History

VLY-US‘s change in revenue this period compared to the same period last year of 12.24% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that VLY-US is holding onto its market share. Also, for comparison purposes, revenues changed by 3.19% and earnings by 7.85% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Earnings Growth Analysis

The company’s net interest income margins showed no year-on-year improvement. In spite of this, the earnings rose, influenced primarily by the increase in net interest income after provisions margins from 84.44% to 85.72%. Loan loss provisions as a percentage of net interest income were 0.94% this period, and 3.30% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (Qtr YOY)
Total Deposits Growth Rate History (Qtr YOY)

The firm’s decline in net interest income margins came despite the relative increase in the levels of net loan assets. In addition, total deposits as a percentage of equity went from 7.22% to 7.33%. On an absolute basis, net loan assets changed 14.01% compared to the same period last year and 2.25% from the previous period. Total deposits changed 14.13% compared to the same period last year and -0.32% from the previous period.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating margins from 28.23% to 30.91% and (2) one-time items. The company’s pretax margins are now 31.13%, compared to 28.52% for the same period last year.

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Access our Ratings and Scores for Valley National Bancorp

Company Profile

Valley National Bancorp. operates as a bank holding company, which through its subsidiary, Valley National Bank, provides retail and commercial banking services. Its services include depository banking, consumer and commercial lending, trust and pension services. The bank operates through four segments: Commercial Lending; Consumer Lending; Investment Management; and Corporate & Other Adjustments. The Consumer Lending segment provides residential mortgages, home equity loans and automobile loans. The Commercial Lending segment comprises of floating rate and adjustable rate commercial and industrial loans, as well as fixed rate owner occupied and commercial real estate loans. The Investment Management segment comprises of fixed rate investments, trading securities, and depending on liquid cash position, federal funds sold and interest-bearing deposits with banks. The Corporate & Other Adjustments segment represents income and expense items not directly attributable to a specific segment, including trading and securities gains, and net impairment losses on securities not reported in the investment management segment. The company was founded in 1983 and is headquartered in Wayne, NJ.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of VLY-US.