- Key takeaway: Bluevine's digital platform can gather deposits more cheaply than Valley's traditional relationship-based model, which should help the bank tamp down its funding costs.
- Forward look: Valley projects that Bluevine's total deposits will grow from $3.1 billion now to $5 billion by the end of 2028.
- Expert quote: "Loan growth is not a problem for Valley. It's funding that loan growth." —Valley Chief Financial Officer Travis Lan
Valley National Bancorp is acquiring Bluevine, the small-business banking platform, in a $340 million deal that the New York-based bank's executives are describing as a deposit play.
"As we've talked about historically, loan growth is not a problem for Valley. It's funding that loan growth," Valley Chief Financial Officer Travis Lan said Monday on a conference call with analysts.
Bluevine currently controls about $2.1 billion of deposits, and that total is expected to grow to $5 billion by the end of 2028, Valley CEO Ira Robbins said on the call. At the same time, Valley expects Bluevine's current 1.44% funding cost to remain relatively stable, even in a higher-for-longer rate environment. Valley's cost of funds, by contrast, is 2.28%.
Small-business entrepreneurs are less price-sensitive than larger commercial clients, "and the Bluevine model has really proven that out when you look at what they're paying" for deposits, Robbins said. "Clients really want a different type of user experience. They want an ability to have a cash-flow management platform that really provides an ease of use for them."
The $66.3 billion-asset Valley, parent to 99-year-old Valley National Bank, has struggled to attract enough deposits to feed its higher-powered lending machine. The mismatch has resulted in a 107% loan-to-core-deposits ratio.
Valley's proposed merger with Bluevine — along with the pending acquisition of South Holland, Illinois-based Providence Financial Corp. — should lead to increased profits as higher-cost wholesale funding runs off Valley's balance sheet. Indeed, Valley is projecting 8% earnings accretion in 2028 as a result of the cash-and-stock deal for Bluevine.
Investors' early impressions of the transaction appear favorable. Valley's stock was trading up about 1% midday Monday at $13.08 per share.
Bluevine, founded in 2013 by Eyal Lifshitz and Nir Klar, initially focused on small-business lending. In recent years, it
Acquiring Bluevine's digital platform gives Valley a base of 175,000 small-business clients to which it can cross-sell its broader product set, plus about 180 technology professionals who can help minimize reliance on third-party software and service providers.
Like numerous other fintechs, Bluevine had been exploring a move into banking. But unlike some competitors who have opted to seek a charter, Lifshitz said his company saw partnering with an existing institution, particularly one with the scale Valley possesses, as more attractive.
"This felt like the best option to accelerate our vision of building our small-business franchise," Lifshitz said.
Valley plans to retain the Bluevine brand, and to allow the fintech to operate as an autonomous unit. Lifshitz is expected to join the merged company and lead its combined small-business operations.
For the past five years, Bluevine has provided deposit services through a partnership with the $5.45 billion-asset Coastal Financial Corp. in Everett, Washington. That relationship will end when Valley's purchase of Bluevine closes, an event that's targeted for the first quarter. After the completion, it should take Valley about six months to transition Bluevine's depositors onto its balance sheet, Robbins said.
On Monday, Coastal CEO Eric Sprink acknowledged that his company's finances will be impacted by the Valley-Bluevine deal, but he said he understood the logic of the merger.
"First and foremost … we're excited for Bluevine. This is a success story," Sprink told American Banker. "We love our partner, and we have nothing but respect for [Valley] and Ira Robbins."
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Just last month, Valley announced plans to pay $247 million for the $1.6 billion-asset Providence, the holding company for Providence Bank & Trust, in a deal that will bolster its presence in the Chicago region. On Monday, Robbins said the task of integrating both Providence and Bluevine will fully occupy his management team.
"We do not anticipate pursuing additional acquisition for the foreseeable future," Robbins said. "Our capital, our resources and our management attention will be explicitly directed toward integration, value realization and executing on our substantial organic-growth opportunities."
