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VLY Stock Alert: Is Valley National the Next Bank to Fail?


  • Valley National (VLY) stock sank 20% yesterday amid worries about regional banks and a downgrade of its shares.
  • The bank’s net interest margin has tumbled this year.
  • VLY specializes in providing loans to midsize landlords in the New York City area.
VLY stock - VLY Stock Alert: Is Valley National the Next Bank to Fail?

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Valley National Bancorp (NASDAQ:VLY) stock tumbled 20% yesterday amid fears that VLY would be hurt by contagion arising from the failure of multiple banks. Adding to the pressure on the name, investment bank Raymond James lowered its rating on VLY stock.

Before this week, Valley National shares had dropped to $9.38 from $11.19 at the end of 2022. This came as worries about U.S. regional banks increased. In addition to First Republic, two other sizeable U.S. banks —SVB Financial’s (OTCMKTS:SIVBQ) Silicon Valley Bank and Signature Bank (OTCMKTS:SBNY) — have gone under in recent weeks.

First Republic specialized in providing loans on favorable terms to wealthy clients, while Silicon Valley used similar tactics with tech startups. Signature was heavily involved with the crypto sector.

Yesterday, Raymond James analyst Steve Moss cut VLY stock to “market perform” from “strong buy.” The analyst cited large increases in the bank’s interest payments to depositors as a key reason for the downgrade.

In conjunction with its first-quarter results, Valley noted on Thursday that its interest costs had climbed to 3% at the end of Q1 from 2.15% in December. As a result, its net interest margin sank to 3.15% from 3.56%. Raymond James believes that the interest rate that the bank pays on its deposits will continue to increase.

More About Valley National Bank

Valley National has “57 billion in assets and overwhelming exposure to commercial real estate,” and it specializes in providing loans to midsize landlords in the New York City area, according to The Real Deal. And S&P Global reports that Valley is America’s biggest bank whose ratio of commercial real estate loans to capital exceeds regulators’ recommendations.

But its CEO, Ira Robbins, says that the bank will be fine even if the valuation of the real estate projects that it financed falls 25%.

On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

Article printed from InvestorPlace Media, https://investorplace.com/2023/05/vly-stock-alert-is-valley-national-the-next-bank-to-fail/.

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