Prosperity Bancshares Reiterated at Neutral
On Dec 30, 2013, we reaffirmed our Neutral recommendation on
Prosperity Bancshares Inc.
). This was based on the company's efficient organic and
inorganic growth strategies. However, we remain concerned about a
still low interest-rate environment (though expected to rise a
little bit in the near term), stringent regulatory requirements
and significant exposure to the real estate loan portfolio.
On Oct 23, Prosperity Bancshares reported third-quarter 2013
earnings per share of 91 cents, which beat the Zacks Consensus
Estimate by a penny. Results benefited from rise in net interest
income, partially offset by decreased non-interest income, higher
operating expenses and increase in provision for credit
The Zacks Consensus Estimate for 2013 remained unchanged at
$3.58 per share over the last 60 days. However, for 2014, the
Zacks Consensus Estimate advanced nearly 1% to $4.00 per share
over the same time period. Prosperity Bancshares currently
carries a Zacks Rank #4 that translates into a short-term rating
Through its acquisitions, Prosperity Bancshares has been
expanding globally and strengthening its position in the existing
markets as well. We believe that with the ongoing consolidation
in the banking sector, the company will continue to avail
promising opportunities to meaningfully enhance shareholder value
through inorganic growth.
Prosperity Bancshares' organic growth has also been strong.
Over the last three years, the company's net revenue has been
growing consistently, with the reported figure for nine months
ending Sep 30 improving as well. Moreover, the company continues
to witness a rise in loans. We anticipate Prosperity Bancshares
to continue benefiting from the growing loan demand amid the
economic recovery, but at a slower pace.
However, mounting non-interest expenses are a major challenge
for Prosperity Bancshares. Additionally, given the stiff
competition in the banking industry, we expect continuous deposit
pricing pressure and a still low interest-rate environment to
weigh on Prosperity Bancshares' net interest margin, creating
headwinds for the company's revenues.
Other Stocks to Consider
Some better-ranked Southwest banks are
ViewPoint Financial Group, Inc.
Southside Bancshares Inc.
Texas Capital BancShares Inc.
). While ViewPoint Financial holds a Zacks Rank #1 (Strong Buy),
Southside Bancshares and Texas Capital BancShares have a Zacks
Rank #2 (Buy).
PROSPERITY BCSH (PB): Free Stock Analysis
SOUTHSIDE BANCS (SBSI): Free Stock Analysis
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VIEWPOINT FINL (VPFG): Free Stock Analysis
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