Valley National Bancorp (VLY) recently announced a quarterly cash dividend of 11 cents per share. This marks a decline of 32.3% from the prior-quarter payout of 16.25 cents. The new dividend will be paid on Jan 2, 2014, to shareholders of record as of Dec 13, 2013.
Valley National Bancorp’s third-quarter 2013 earnings per share missed the Zacks Consensus Estimate by a penny. A decline in the top line and higher operating expenses were primarily responsible for lower-than-expected results.
Additionally, given a still low interest rate scenario, Valley National Bancorp’s net interest margin continues to be under pressure. Hence, the company resorted to dividend reduction and various cost-cutting measures to keep itself afloat.
With the Federal Reserve’s (Fed) continuation of its bond-buying program, the possibility of a rise in interest rates in the near term seems bleak. Moreover, as per market rumors, the Fed in the near future might increase the monetary easing program from $85 billion to $108 billion per month.
Further, to prevent any economics fallouts in the future, the regulatory authorities have become cautious and set higher level of capital requirements. To meet the regulatory criteria, Valley National Bancorp has to maintain a decent level of capital. Therefore, the slashing of its quarterly dividend seems to be part of the company’s efforts to strengthen its existing capital position.
Currently, Valley National Bancorp carries a Zacks Rank #3 (Hold). Other better performing Northeast banks include Arrow Financial Corporation (AROW), Center Bancorp, Inc. (CNBC) and CNB Financial Corp. (CCNE). All these stocks have a Zacks Rank #1 (Strong Buy).
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