NEW YORK–(COMMERCIAL THREAD) – Kroll Bond Rating Agency (KBRA) assigns a senior unsecured debt rating of BBB +, a subordinated debt rating of BBB and a short term debt rating of K2 to Valley National Bancorp, based in Wayne, New Jersey ( NASDAQ: VLY) (“the Company”). In addition, KBRA assigns deposit and senior unsecured debt ratings of A-, a subordinated debt rating of BBB +, and deposit and short-term debt ratings of K2. at the main subsidiary, Valley National Bank The outlook for all long-term ratings is stable.

Ratings are underpinned by VLY’s strong operating model and strategy, executed by an experienced management team, which benefits from a long-standing and consistently conservative credit culture. As for the latter, VLY’s impressive track record of asset quality, including a record annual NCO ratio of just 0.45% during the financial crisis – a measure that significantly outperformed the vast majority of its peers – is viewed fairly favorably, especially given slowing economic conditions. Operating in the highly competitive New York City market has perpetuated an above-average cost of deposits, which, together with a certain appetite for the relatively low-risk, low-yielding categories of loans, has undoubtedly made a difference. limited VLY’s margins, leaving recent revenues below the peer average. Nevertheless, performance remained rather stable (core ROA of 0.90% – 1.00% since 2018) reflecting continued low credit costs. VLY’s credit strengths somewhat counterbalance the recent operating history with slightly lower core capital metrics including a TCE ratio below 7%. However, the capital accretion transaction of Oritani Financial Corp. increased the ratios between 50 and 100 basis points (the TCE rising to 7.6% at YE19); an adequate level taking into account the risk profile of VLY. While there is a concentration of CRE investors (426% of total RBCs in 4Q19), it is driven by VLY’s exposure to historically less risky NYC multi-family loans. In addition, VLY’s traditional CRE portfolio is well diversified by property type and geography. With rather modest exposure to the ‘at risk’ sectors linked to the COVID-19 pandemic, including less than 3% of loans in hotel and restaurant loans, we expect VLY to outperform on the front. of credit in this downturn. Although VLY’s revenue remains rather allocation dependent – fees are typically around 10% of total revenue – pre-tax base income, before provision, has increased by 18% sequentially, demonstrating improved profitability .

Click on here to view the report. To access the assessments and relevant documents, click on here.

KBRA continues to monitor the potential direct and indirect effects of coronavirus disease (COVID-19) on the banking and other sectors. Please refer to our publication Coronavirus (COVID-19): US banks stable despite uncertainties for more details.

Ratings are based on KBRA Global rating methodology for banks and bank holding companies published on October 16, 2019.

Related publications

Disclosures

Further information on key credit considerations, sensitivity analyzes that examine the factors that may affect these credit ratings and how they might lead to an upgrade or downgrade, and ESG factors (when they are a key factor in changing the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially significant sources that were used to prepare the credit rating and information about the method (s) (including significant models and sensitivity analyzes of the relevant key rating assumptions, if any) used to determine the credit rating is available in the United States Information Disclosure Form located here.

Information on the meaning of each rating category can be located here.

Further information relating to this rating measure is available in the US Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures can be found at www.kbra.com.

About KBRA

KBRA is a full-service credit rating agency registered as an NRSRO with the United States Securities and Exchange Commission. In addition, KBRA is appointed as the designated rating agency by the Ontario Securities Commission for issuers of asset-backed securities to file a simplified prospectus or a shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a credit rating provider and is a credit rating agency (ARC) certified with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a rating agency.