Valley Bank: Middle-market momentum meets uncertainty in 2026

The basics:

• 92% of firms rate cash flow as good or very good; productivity up to 95%
• Profitability rose to 89% with strong employee, customer retention
• Rising concerns: inflation, interest rates, geopolitical uncertainty, hiring, fraud
• Leaders prioritize efficiency, retention, AI adoption, data analytics, cost control for 2026

Results from the second annual Valley National Bank Middle-Market C&I Survey released Feb. 19 show commercial and industrial businesses ended 2025 with strong financial performance, but face rising economic uncertainty heading into 2026.

The survey of 500 middle-market companies was conducted in December 2025 among financial decision-makers across Valley’s footprint.

Most firms reported gains in productivity, cash flow, profitability, and customer and employee retention. Optimism remains high, with 93% expressing confidence in the three-year outlook.

The Middle-Market C&I Survey found:

• 92% rated their cash flow as good or very good, up from 79%
• Productivity increased from 85% to 95%
• Profitability rose from 79% to 89%

However, external pressures are intensifying. Inflation and interest rate concerns have grown significantly (from 45% to 57%), along with geopolitical and trade uncertainty (up from 41% to 52%).

“Middle-market businesses help drive the U.S. economy and the positive results in this survey indicate that many are entering 2026 in strong and stable positions,” said Gino Martocci, president of Commercial Banking, Valley Bank. “To maintain this momentum, leaders should focus on the basics, be selective in what they prioritize and those who focus on a few core areas and remain vigilant and adaptable, will achieve greater success in an evolving landscape.”

Leaders identified six key priorities for 2026:

1. Financial and operational efficiency
2. Customer retention
3. Pricing and cost control
4. AI and machine learning adoption
5. Data analytics and business intelligence
6. Pricing strategy and cost efficiencies

Still, many firms acknowledge execution gaps. Only 40% say they manage cash flow effectively, 39% are confident in budgeting and forecasting, 37% strong in cost control, 36% in profit-margin management, 35% successfully integrate financial technology, and just 30% believe they are optimizing working capital.

Growing concerns

Hiring also remains difficult: 30% cite recruiting challenges and 17% struggle with employee retention.

Fraud risk is another growing concern. While 68% say they need better fraud protection, 39% of respondents use mitigation services. “Fraud protection is not optional, it is foundational,” said Martocci. “Simple safeguards, real-time alerts, and clearly defined response protocols can dramatically reduce financial loss and business disruption.”

Similarly, many value banking advisory services, but only a small share (22%) actively use their banker as a strategic advisor.

Overall, the report concludes that middle-market companies enter 2026 with strong performance and optimism, but face pressures from the factors listed above. Leaders are focusing on tighter operations and smarter decision-making to achieve resilient – not just rapid – growth.

“The mandate for the year ahead is straightforward: protect the fundamentals, improve efficiency, strengthen retention, and maintain visibility around cash and risk. The companies that do these things well will be better prepared to grow, even when conditions shift,” the report concludes.