VLY: Lower-Cost Deposits Will Drive Above-Peer Net Interest Margin Expansion

Analysts have modestly raised their fair value estimate for Valley National Bancorp to $13.75 from $13.58, as they increasingly expect lower cost deposit growth, improving net interest margins, and a visible path to faster earnings growth and higher returns on tangible common equity.

Analyst Commentary

Bullish analysts have increasingly highlighted Valley National Bancorp as a differentiated value opportunity in the regional banking space, pointing to both stronger earnings momentum and a narrowing valuation gap versus peers.

Recent research has featured multiple target price increases and rating upgrades, reflecting rising confidence that management can translate balance sheet repositioning and operating discipline into sustainably higher returns.

Bullish Takeaways

Bullish analysts see a clear path to above peer net interest margin expansion, citing momentum in lower cost deposit growth and the shift toward relationship based commercial and industrial lending.
Several research notes point to stronger than expected earnings power, including boosts to estimates after recent quarterly beats, supporting the view that earnings growth can outpace much of the regional bank group.
Valley National is framed as a top value idea, with multiple upgrades to Buy or Overweight as analysts argue that improved profitability and asset mix should help close the current valuation discount to peers.
Analysts see a visible route to achieving management's mid to high teens return on tangible common equity targets over the next few years, driven by net interest margin gains, operating expense discipline, healthier credit costs, and continued loan growth.

Bearish Takeaways

More cautious analysts maintain only a Market Perform stance, indicating that while earnings revisions are positive, they prefer to see a longer track record of execution before fully endorsing the higher return profile implied in more bullish targets.
Despite progress in diversifying the loan book, Valley National is still viewed as working through a transition away from a commercial real estate heavy mix, which could weigh on valuation until investors gain more confidence in the durability of the new commercial growth strategy.
Some commentary implies that the recent re rating and price target increases already capture a portion of the expected earnings rebound, leaving less room for upside if net interest margin expansion or loan growth underdeliver.
There remains sensitivity to the broader macro and regulatory backdrop for regional banks, meaning that sector wide volatility or a weaker credit cycle could delay the realization of the higher returns that underpin the most optimistic valuation cases.

What's in the News

Completed a share repurchase tranche, buying back 1,782,685 shares, or roughly 0.32% of shares outstanding, for a total of $16.35 million under the February 21, 2024 authorization (company filing).
Reported a sharp improvement in credit costs, with third quarter 2025 net loan charge offs falling to $14.6 million from $37.8 million in the prior quarter and $42.9 million a year earlier (company filing).

Valuation Changes

Fair Value Estimate has risen slightly to $13.75 from $13.58, reflecting modestly higher confidence in earnings growth and return potential.
Discount Rate has edged down marginally to 7.17% from 7.17%, implying a slightly lower required return embedded in the valuation model.
Revenue Growth Assumption is essentially unchanged at about 15.85%, suggesting no material shift in long term top line expectations.
Net Profit Margin Forecast remains effectively flat at roughly 34.85%, indicating a stable view on long term profitability.
Future P/E Multiple has increased slightly to 10.06x from 9.94x, pointing to a modestly higher valuation multiple applied to expected earnings.

Growing core deposits, digitalization, and operational efficiency are expected to drive revenue growth, lower funding costs, and improve margins and returns.
Strategic market expansion and investment in specialized verticals are diversifying revenue streams, enhancing asset quality, and boosting earnings resilience.
Ongoing geographic, sector, and digital transformation risks, alongside rising compliance costs and heightened competition, threaten Valley's profitability, growth, and long-term operational resilience.

Catalysts

About Valley National Bancorp

Operates as the holding company for Valley National Bank that provides various commercial, private banking, retail, insurance, and wealth management financial services products.What are the underlying business or industry changes driving this perspective?

Valley's accelerating growth in commercial & specialty deposit accounts-driven by technology investments and targeted market penetration-is likely to yield structurally lower funding costs and enhanced net interest margin as legacy brokered deposits are replaced with lower-cost core deposits, directly supporting revenue and margin expansion.
Expansion in high-growth markets such as Florida, the Sun Belt, and suburban regions is set to increase loan demand and fee-based income as Valley leverages demographic shifts and urbanization trends-underpinning long-term revenue growth.
Sustained investment in specialized verticals (healthcare, fund finance, and technology banking), with demonstrated low credit losses and stable asset quality, is expected to boost fee and net interest income while supporting better risk-adjusted net margins.
Valley's scalable, client-centric noninterest income drivers (e.g., capital markets, treasury management, tax credit advisory) are growing faster than peers and diversifying revenues, strengthening earnings resilience and stability.
Management's continued focus on digitalization and operational efficiency-as seen in improved delivery channels and cost discipline-is likely to further lower the cost-to-income ratio and lift net margins and returns on equity over the next several years.

Valley National Bancorp Earnings and Revenue Growth

Valley National Bancorp Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Valley National Bancorp's revenue will grow by 16.6% annually over the next 3 years.
Analysts assume that profit margins will increase from 26.6% today to 31.8% in 3 years time.
Analysts expect earnings to reach $807.5 million (and earnings per share of $1.21) by about September 2028, up from $425.7 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.5x on those 2028 earnings, down from 14.1x today. This future PE is lower than the current PE for the US Banks industry at 11.9x.
Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.13%, as per the Simply Wall St company report.

Valley National Bancorp Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Long-term geographic concentration in markets such as New Jersey, New York, and Florida exposes Valley National Bancorp to outsized regional risks-including demographic outflows, local economic downturns, and market-specific regulatory or political developments-which could increase credit risk and ultimately lead to revenue and earnings volatility.
Persistent reliance on commercial real estate (CRE) lending-even as CRE concentration ratio has declined-means Valley remains exposed to secular weakness in office and retail segments, which threatens asset quality and may necessitate higher loan loss provisions, negatively impacting net margins and profitability.
As digital transformation continues to accelerate across the banking industry, Valley National Bancorp's investments in technology and fintech partnerships, while noted, still appear subscale relative to larger peers, potentially limiting the company's ability to attract and retain digital-savvy customers and putting ongoing pressure on revenue growth and efficiency ratios.
Increasing long-term compliance and cybersecurity costs required to meet evolving regulatory, security, and ESG standards will disproportionately burden regional banks like Valley, applying pressure to operating efficiency and eroding profit margins over time.
Gradual disintermediation by non-bank lenders and fintechs in the consumer and small business lending space, alongside heightened competition for deposit growth, risks reducing Valley's share of wallet, resulting in stagnant or lower loan growth and jeopardizing future revenue and earnings expansion.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $11.05 for Valley National Bancorp based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $13.0, and the most bearish reporting a price target of just $10.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.5 billion, earnings will come to $807.5 million, and it would be trading on a PE ratio of 11.5x, assuming you use a discount rate of 7.1%.
Given the current share price of $10.72, the analyst price target of $11.05 is 3.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analysts Raise Valley National Bancorp Target Amid Optimism on Margin Expansion and Loan Growth