Rising Funding Costs Impact Valley National Bancorp, Analyst Drops Rating To Market Perform

Raymond James analyst Steve Moss downgraded Valley National Bancorp VLY to Market Perform from Strong Buy.
The analyst is bearish on increasing revenue challenges risk due to VLY's rate-sensitive deposit base and rapidly rising funding costs for the industry.
Moss notes that VLY's deposit cost has increased faster than its peers and is concerned that it will continue to grow until the gap with Fed funds further narrows.
The analyst thinks that VLY's ability to reprice existing loans to rates to support net interest income (NII) growth is difficult without a significant increase in problem credits.
Although Moss expects strong loan growth, he is concerned that VLY will have to fund loans closer to Fed funds amid a higher rates environment and projects new loans not to be accretive to NII.
Moss decreased adjusted EPS estimates to $1.17 from $1.36 for 2023 and $1.07 from $1.25 for 2024.
Price Action: VLY shares are trading lower by 17.6% at $7.73 on the last check Monday.

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