KBRA Assigns Preferred Stock Rating and Affirms Existing Ratings to Valley National Bancorp
2024年7月30日 - 5:15AM
ビジネスワイヤ(英語)
KBRA assigns a preferred stock rating of BBB-, as well as
affirms the senior unsecured debt rating of BBB+, the subordinated
debt rating of BBB, and the short-term debt rating of K2 for
Morristown, New Jersey based Valley National Bancorp (NASDAQ: VLY)
(“the company”). Additionally, KBRA affirms the deposit and senior
unsecured debt ratings of A-, the subordinated debt rating of BBB+,
and the short-term deposit and debt ratings of K2 for lead
subsidiary, Valley National Bank. The Outlook for all long-term
ratings is Stable.
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 $600 million (~1% of total loans)
in loans for properties that had more than 50% in rent regulated
units, while office exposure was rather manageable at 7% of total
loans. While VLY has experienced some credit migration within the
loan portfolio with total criticized/classified loans increasing to
over 5% of total loans at 2Q24, this is partially due to recent
changes in the company's views towards certain risk mitigation
factors that resulted in credit downgrades in 2Q24. Furthermore,
KBRA has a favorable view of the company’s regional diversification
with its meaningful presence in the Southeast (VLY had nearly $10
billion in deposits from its Florida and Alabama markets),
complementing its legacy markets in the New York/New Jersey
region.
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 New York/New Jersey), VLY maintained a rather robust
retail deposit operation, complemented by various specialty deposit
business lines that have proven to be comparatively durable with no
material deposit runoff incurred following the highly publicized
bank failures in 1Q23. VLY has consistently maintained below peer
capital levels, including a CET1 ratio that has recently tracked
between 9% - 9.5%. That said, the company has committed to
management of higher capital ratios, including a CET1 ratio near
10% by YE24 (VLY reported a CET1 ratio of 9.6% at 2Q24). Moreover,
the company has de-emphasized CRE loan growth, which, coupled with
management of higher capital, is intended to reduce its CRE
concentration levels to below 400% over the next 1 – 2 years.
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
Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit
rating agency registered with the U.S. Securities and Exchange
Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is
registered as a CRA with the European Securities and Markets
Authority. Kroll Bond Rating Agency UK Limited is registered as a
CRA with the UK Financial Conduct Authority. In addition, KBRA is
designated as a designated rating organization by the Ontario
Securities Commission for issuers of asset-backed securities to
file a short form prospectus or shelf prospectus. KBRA is also
recognized by the National Association of Insurance Commissioners
as a Credit Rating Provider.
Doc ID: 1005280
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240729751189/en/
Analytical Contacts
Jason Szelc, Senior Director (Lead Analyst) +1 301-969-3174
jason.szelc@kbra.com
Ian Jaffe, Senior Managing Director +1 646-731-3302
ian.jaffe@kbra.com
Joe Scott, Senior Managing Director (Rating Committee Chair) +1
646-731-2438 joe.scott@kbra.com
Business Development Contact
Justin Fuller, Managing Director +1 312-680-4163
justin.fuller@kbra.com