KBRA affirms Valley National Bancorp ratings with stable outlook

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KBRA affirms Valley ratings

Highlights

KBRA affirms Valley National Bancorp's BBB+ senior unsecured debt rating and stable outlook, citing improved risk management and long-term credit performance.
CRE loan concentration drops sharply to 332% in Q1 2026 from 473% at year-end 2023, with net charge-off ratio remaining below 0.2% for three quarters.
Core deposits grow at 9% annualized in Q1 2026 and 2025, brokered deposits fall below 10%, and a $449 million equity raise keeps CET1 ratio at 10.5%-11.0%.

Credit profile improves as CRE exposure declines

As reported by Kroll Bond Rating Agency, KBRA affirms Valley National Bancorp's senior unsecured debt rating at BBB+, subordinated debt at BBB, preferred stock at BBB-, and short-term debt at K2. KBRA also affirms Valley National Bank's deposit and senior unsecured debt ratings at A-, subordinated debt at BBB+, and short-term deposit and debt ratings at K2.

KBRA says the ratings are supported by the company's long-term credit performance and an operating strategy with a stronger focus on risk management. While Valley National Bancorp records some credit deterioration in recent years, mainly tied to a high concentration in commercial real estate, or CRE, loans and slightly above-average credit losses in 2024, the agency says the bank's response to stressed parts of the portfolio is producing meaningful improvement.

Credit losses fall back toward historical levels, with the net charge-off ratio staying below 0.2% in each of the last three quarters. KBRA also highlights a sharp reduction in CRE concentration to 332% in the first quarter of 2026 from 473% at year-end 2023, driven by strategic runoff, loan sales and a larger equity base.

Earnings, funding and capital support ratings

Earnings continue to strengthen alongside improved credit trends and a more favorable interest rate environment. Return on average assets remains above 1% in recent quarters, while net interest margin expansion broadly tracks rated peers and is expected to keep modest upward momentum as lower-yielding long-term assets mature.

KBRA says Valley National Bancorp is also benefiting from solid core deposit growth, supported by its retail branch network and commercial and specialty banking businesses. Core deposit growth runs at about 9% annualized for the first quarter of 2026 and full-year 2025, helping the bank reduce wholesale funding use, with brokered deposits falling below 10% of total deposits in the first quarter of 2026.

Lower reliance on wholesale funding pushes funding costs down, with the total cost of funds at 2.41% in the first quarter of 2026. The ratings agency also points to capital levels that are now more consistent with large regional bank peers, supported by a common equity raise completed in the fourth quarter of 2024 that generated about $449 million in net proceeds and helped keep the CET1 ratio in a 10.5% to 11.0% range.

In our earlier article on KBRA’s rating affirmation for FB Financial and its subsidiary FirstBank, we noted that the agency kept the group’s long- and short-term debt ratings unchanged with a Stable Outlook. The review highlighted stronger profitability after securities restructurings and the Southern States Bancshares acquisition, alongside solid asset quality, conservative capital metrics, and a largely core-deposit funding base with limited wholesale reliance.

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