Piper Sandler lifts Valley National stock rating to Overweight

On Monday, Piper Sandler analyst Frank Schiraldi upgraded Valley National Bancorp (NASDAQ:VLY) stock rating from Neutral to Overweight and set a price target of $11.00. Schiraldi anticipates a significant improvement in the bank’s profitability within the next 12 months, expecting it to achieve a return on assets (ROA) of 1% by year-end, a notable increase from the 74 basis points (bp) ROA reported in the fourth quarter. According to InvestingPro data, the bank’s current ROA stands at 0.62%.

Valley National’s stock is currently perceived as undervalued, trading under tangible book value (TBV) and approximately 7.5 times its expected 2026 earnings. This assessment aligns with InvestingPro’s Fair Value analysis, which indicates the stock is undervalued. The bank currently trades at 0.7x book value and maintains an impressive 52-year streak of consecutive dividend payments. Schiraldi also expressed confidence in the bank’s credit profile, forecasting that credit costs will decrease significantly year-over-year, aligning with the company’s guidance.

The bank has been working on reducing its commercial real estate (CRE) concentration, which stands at 360%. This effort has been bolstered by a roughly $450 million common equity raise conducted late last year. This capital increase also helped alleviate concerns about the bank’s capital levels, which were previously considered below its peers.

With a change in administration, regulatory concerns appear to be less daunting for Valley National, which currently has total assets amounting to $62 billion, well below the $100 billion threshold that often brings increased regulatory scrutiny. Schiraldi’s outlook suggests that the bank is positioned for a favorable financial trajectory in the near term.

In other recent news, Valley National Bancorp reported its Q3 2024 financial results, revealing a mixed performance. The company posted earnings per share (EPS) of $0.13, which fell short of the $0.15 forecast by analysts. However, revenue surpassed expectations, coming in at $474.18 million against the anticipated $468 million. Valley National Bancorp’s net income rose to $98 million from $70 million in the previous quarter, highlighting improved profitability.

The company also announced the appointment of Eyal Efrat as an independent director to its board, following the unexpected resignation of Avner Mendelson. Mendelson’s resignation was disclosed in a recent SEC filing, with no reported disagreements with the company or its management. Bank Leumi, which had designated Mendelson under an Investor Rights Agreement, plans to appoint a new designee to fill the vacancy.

These developments come as Valley National Bancorp continues to focus on strategic shifts, including a move towards commercial and industrial lending. The company anticipates low single-digit annualized loan growth in Q4 2024, with a slight decline in net interest income due to planned loan sales. The bank expects credit costs to normalize significantly in 2025, as stated by CEO Ira Robbins and CFO Mike Hagedorn during the earnings call.

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