VALLEY NATIONAL BANCORP (VLY): what the price assumes

In the published model solve dated 2026-Q2, anchored at $13.92, VALLEY NATIONAL BANCORP (VLY) is priced for 11.0% return on equity. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-28.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/VLY

Headline

FieldValue
TickerVLY
CompanyVALLEY NATIONAL BANCORP
Current price$13.92/sh
CompositionConsumer Banking 21% / Commercial Banking 79%

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basisfinancials
Return on equity needed11.0%
Return on equity now7.3%
ROE gap+3.7pp
Price-to-book0.97x

Solve inputs: computed at a 11.2% cost of equity with 4% terminal growth over a 10-year stage, on common book equity (FY2026).

How unusual the bet is: elevated

ReferenceValue
vs own history+2.60σ
cohort percentile (of 122 peers)7
sustained it ~10 years at this level73%
implied end-window share0%

Valuation X-Ray

The price is supported by asset-based and earnings-power and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.03x3expensive
Earnings1.09x1expensive
Relative—0—
Growth0.51x2justifies

Families that justify the price: Asset, Earnings, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.0%); the inversion above states its own rate.

Per-Model Detail (n=6)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth——no—
Bank Fair Value (P/TBV)—$8.881.57xyesTBVPS $10.78 × 0.82x (ROE (TTM) 8.8% / CoE 9.3%, g=5.0% (sustainable: 65% retention × ROE, 5% cap; not the terminal-growth assumption), credit 1.14% allowance/loans → ×0.93)
Relative ValuationRelative——noP/E 10x (static sector reference · 2026-04), scenarios: 8.3x / 10.0x / 11.7x (bear / base = reference held flat / bull), EV/EBITDA N/Ax
Simple DDMGrowth$98.200.14xyesDPS $0.44, g=8.8% (sustainable: ROE (TTM) × retention; not the terminal-growth assumption), ke=9.3%
Two-Stage DDMGrowth$15.680.89xyesStage 1: 20% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$13.571.03xyesBV/sh $14.33, ROE (TTM) 8.8%, ke 9.3%
Two-Stage Excess ReturnAsset$13.211.05xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth——noRev $1.9B, growth 11% (input: historical growth; tapered), Terminal P/S: 3.4x / 4.1x / 4.8x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative——noEPS $1.18, growth 35% (input: historical EPS growth), PEG=0.32 (Undervalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings——no—
Residual IncomeAsset——no—
Graham NumberAsset$19.500.71xyes√(22.5 × EPS $1.18 × BVPS $14.33) — Graham's conservative floor
EV/EBITDA RelativeRelative——no—
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings——noEPS $1.18 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative——no—
PEG Fair ValueRelative——noEPS $1.18 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings YieldEarnings$12.761.09xyesEPS $1.18 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Economic-Unit Decomposition (Sum Of The Parts)

The issuer is a funded financial business. Debt, interest, and cash flows are operating inputs, so industrial EV, net-debt, WACC, and free-cash-flow lenses do not apply; value the common-equity claim with book, earnings, capital, and payout economics.

UnitRoleValuation basisRevenueReported profitValue evidenceStatus
Consumer Bankingfinancialequity$392.3m—withheldunresolved standalone equity facts required
Commercial Bankingfinancialequity$1.5b—withheldunresolved standalone equity facts required

No unit-level total common-equity value is stated. Each financial unit requires supported standalone common equity, normalized earnings, capital adequacy, and payout capacity. Consolidated debt, interest, and cash are operating balances, not an enterprise-to-equity bridge; company-level book, earnings, capital, and payout lenses remain the coherent cross-checks.

Solvency

FieldValue
Share count CAGR (dilution)2.3%

Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).

Bullet Takeaways

Bull Case

The moat for a bank like Valley is its deposit franchise, and that is the right place to start because it is what just turned in the bank's favor. A regional with deep roots in the New Jersey, New York and Florida markets funds itself with relationship deposits that are stickier and cheaper than wholesale money, and in Q1 2026 the value of that funding base showed up directly: the net interest margin expanded to 3.17% on lower deposit costs and a better funding mix. Net interest income rose to about $472 million, and net income jumped to roughly $164 million from $106 million a year earlier. A bank's earnings power is the spread it earns on its capital, and the spread is widening.

The profitability recovery is the core of the bull case because the price is paying for exactly that. At today's quote the market assumes Valley sustains a return on equity near 11.4%, well above the roughly 7.3% it has recently earned. The Q1 trajectory makes that gap look bridgeable rather than fanciful: provisions for credit losses fell to about $21 million from roughly $63 million a year earlier, net charge-offs declined to about $17.5 million, and non-accrual loans sat at a contained 0.85% of total loans with the allowance at 1.18%. Lower credit costs flow straight to the bottom line and lift ROE, and management has paired that with accelerating loan growth and an improving asset mix.

The capital-return record gives the story ballast. Valley carries a 52-year streak of consecutive dividends, a discipline few banks can match, and in February 2026 it authorized a new buyback of up to 25 million shares running through 2028. Buying back stock near one times book, while earnings recover, is accretive to book value per share and to ROE. The Street sees a path: the consensus rating is a buy, brokerage recommendations average out to outperform, and the average target sits modestly above the current price. The bet is that a cheap, deposit-rich bank with improving credit and margin closes the ROE gap, and that a one-times-book price re-rates as it does.

Bear Case

The structural worry with Valley is the shape of its balance sheet, and it is concentration rather than capital that defines the risk. Roughly four-fifths of the book is commercial banking, and Valley has long been one of the more commercial-real-estate-heavy regional banks in the country. The CRE concentration ratio has come down, to around 325% from roughly 349%, but a number that size means the bank's fate is tied to a single, cyclical asset class in a handful of geographies. Office and multifamily values in the Northeast remain under pressure from higher-for-longer rates and changed work patterns, and a concentrated lender has nowhere to hide if a region or a property type turns. The improving credit metrics of Q1 are encouraging, but CRE losses tend to arrive late in a cycle, not early.

The second problem is that the price already assumes the recovery is largely won. The market is underwriting an ROE near 11.4% when the bank has been earning about 7.3%, and the base rate is sobering: only about 72% of firms that reach this return sustain it for a decade. The recent margin expansion leaned on falling deposit costs, which is helpful but not infinitely repeatable. If rate moves reverse the funding tailwind, or if loan growth forces the bank to pay up for deposits again, the NIM gain stalls and the assumed ROE looks aspirational. Valley sits in the lower half of its peer group on price-to-book for a reason: the market is not yet convinced the higher return is durable.

Finally, the capital story has a limit the bulls sometimes gloss over. Valley has historically prioritized its dividend streak over buybacks, and even with a new 25-million-share authorization, a bank only repurchases stock to the extent its regulatory capital and earnings allow. If credit costs re-accelerate or CRE marks worsen, capital that might fund buybacks gets diverted to reserves, and the accretion the bull case counts on slows. At one times book the stock is not expensive, but it is not the deep-discount, distressed-bank bargain it might have been; the easy value has already been recognized, and what remains is a bet on execution against a concentrated, cyclical loan book.

Valuation

A bank is worth the return it earns on its capital, so Valley's price is read off book value, not an operating multiple. At $14.08 (June 28, 2026) the market is paying roughly one times book and, on a 11.5% cost of equity with 4% terminal growth, that solves to an assumed sustained return on equity of about 11.4%. The reference point that matters is the bank's recent reality: it has been earning closer to 7.3%. So the price is not asking for a cheap stub of a struggling bank; it is asking for a recovery to a double-digit return, well above its own recent record.

The X-ray is consistent with a value-and-asset-supported name rather than a stretched one. That clustering near book is exactly what you expect for a bank: tangible book and current earnings broadly account for the price, with the gap to the assumed ROE being the question, not a large speculative premium.

The honest framing is that this is an ROE-recovery bet at a fair, not bargain, price. The implied 11.4% is elevated relative to fundamentals, but the Q1 print, margin to 3.17%, provisions down by two-thirds year over year, lower charge-offs, shows the recovery has begun. The base rate, only about 72% of firms sustaining such a return for a decade, and the lower-half peer price-to-book argue for caution. The analyst consensus, a buy with an average target a little above the price and JPMorgan trimming toward $14.50, captures the balance: the upside depends on Valley actually earning the ROE the price already assumes, which makes credit and margin the swing variables rather than the entry multiple.

Catalysts

The recurring catalyst is the profitability recovery, quarter by quarter. Q1 2026 set the template: net income of about $164 million versus $106 million a year earlier, adjusted EPS of $0.29 beating consensus, a net interest margin expanding to 3.17% on lower deposit costs, and a provision for credit losses falling to about $21 million from roughly $63 million. The key checkpoint is whether the margin and credit improvement continue, since both feed directly into the return on equity the price assumes.

Credit quality in the commercial-real-estate book is the catalyst that cuts both ways. Non-accrual loans were a contained 0.85% of total loans, the allowance was 1.18%, and net charge-offs declined to about $17.5 million, while the CRE concentration ratio fell toward 325% from roughly 349%. Watch office and multifamily performance in the Northeast and Florida specifically, because that is where a deterioration would show up first and where the bank is most exposed.

Capital return is the third thread. Valley authorized a new buyback of up to 25 million shares through 2028 and continued its 52-year dividend streak. The pace of repurchases at around one times book, and any change to the dividend, are direct drivers. Analyst sentiment is a mild tailwind, with a buy consensus and an average target modestly above the current price, though JPMorgan recently trimmed its target to $14.50, so a clear continuation of the ROE recovery is what would move the consensus higher.

Peer Cohorts (Per Segment, With Filing Citations)

Consumer Banking (reported)

Commercial Banking (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

View the full interactive VLY report on boothcheck