Piper downgrades Prosperity Bancshares to Neutral on lower TBVPS trajectory

As previously reported, Piper Sandler downgraded Prosperity Bancshares (PB) to Neutral from Overweight with a price target of $74, down from $77, as the firm believes the five-year tangible book value per share earn-back on Stellar Bancorp (STEL) deal will keep investors on the sidelines. The firm notes that there are clear long-term strategic benefits to the Stellar acquisition, primarily acquiring a high-quality deposit base, securing greater Houston MSA density, and deploying excess capital. That said, Piper thinks the price that Prosperity had to pay to acquire this quality was a step too far in the near-term and will keep the shares from outperforming as investors digest the puts and takes of the pro forma franchise.