On Sep 27, 2013, we reaffirmed our long-term recommendation on
Prosperity Bancshares Inc.
) at Neutral. This was based on the company's continuous organic
and inorganic expansion as well as robust second-quarter results.
However, we remain concerned about the company's rising expenses.
Why the Neutral Stance?
Acquisitions have always been a crucial part of Prosperity
Bancshares' growth strategy. They are expected to increase the
company's geographical footprint and boost its market presence in
the existing areas. Moreover, continuously improving credit
quality and strong revenue growth were other major positives.
Moreover, Prosperity Bancshares' second-quarter 2013 earnings
marginally beat the Zacks Consensus Estimate. Results were aided
by top-line growth, partially offset by higher operating expenses
and a rise in provision for loan losses.
The Zacks Consensus Estimate for 2013 rose by a penny to $3.59
per share over the last 60 days. Moreover, for 2014, the Zacks
Consensus Estimate increased 3.6% to $4.00 per share over the
same time frame. The company currently carries a Zacks Rank #2
However, continuous deposit pricing pressure, sluggish loan
demand and a low interest-rate environment - which would weigh on
Prosperity Bancshares' net interest margin - are headwinds for
revenues. Also, slow economic growth rate, exposure to the real
estate loan portfolio and stringent regulations will likely dent
Prosperity Bancshares' financials in the near term.
Other Banks to Consider
Some financial stocks that are worth a look include
Astoria Financial Corp.
Nationstar Mortgage Holdings Inc.
BofI Holding, Inc.
). All of these carry a Zacks Rank #1 (Strong Buy).
ASTORIA FINL CP (AF): Free Stock Analysis
BOFI HLDG INC (BOFI): Free Stock Analysis
NATIONSTAR MTGE (NSM): Free Stock Analysis
PROSPERITY BCSH (PB): Free Stock Analysis
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