Valley National upgraded by JPMorgan, citing overblown real estate concerns

Investing.com -- Valley National Bancorp (NASDAQ:VLY) stock was flat after analysts at JPMorgan raised their rating to Overweight from Neutral, saying concerns about commercial real estate exposure among regional banks were overblown.

The analysts have a $10 price target on the stock, which is trading around $8 a share. "We see this as an opportunity to go against the herd and acquire VLY shares at a deeply discount valuation," the analysts wrote in a note on Monday.

The shares are down 29% so far this year, reflecting investor worries about the banking sector overall after the failure of three large banks in recent months. Commercial real estate has been weighing on regional bank stocks on concerns that offices are still vacant after return to work, and the possibility of an economic downturn affecting real estate prices.

JPMorgan analysts examined exposures to CRE and discovered Valley's office loan exposure is different, with the average loan size of $2.2 million falling below the peer average of $3.1M. "In addition, when we peel back Valley’s exposure to the areas of CRE under the most stress in central business district office, we find that the bank has only ~$0.2B in Manhattan office CRE loans (or less than 1% of total loans)," they said.