Prosperity Bancshares is a safe pick in a sector recently identified as risky, according to Wolfe Research. Analyst Bill Karkach upgraded shares of the regional bank twice to outperform the underperformer, saying the bank enjoys “relative safety on higher ground” amid sectoral turmoil initially sparked by the March shutdown of the Silicon Valley bank and reignited by JPMorgan’s winning auction for First Republic Bank. this week. Karcash also raised its price target by $6, to $68. His new target indicates the stock could rise as much as 15% from Tuesday’s close. “We view PB as a Journey to Quality name that offers investors an attractive hiding place amid the current market turmoil,” he said in a note Wednesday to clients. He said Prosperity has a strong capital position that will allow it to weather a tougher regulatory background. He said this is of increasing importance as industry insiders anticipate tougher regulations in the wake of recent bank failures. Prosperetti’s “extraordinary” credit should remain so, he said, adding that conservative underwriting is the bank’s DNA. He said the bank has historically had fewer writedowns than its regional peers. Meanwhile, he said, Al-Izdihar should outperform its peers in the deposit privilege. Carcache described the Prosperity franchise as “superior”, an updated course and projected final deposits below the industry average. Karkach noted that commercial real estate represents only $5 billion of the bank’s $19 billion loan book, and almost all of those loans are concentrated in Texas. Office CRE is $728 million, which is 14% of total mortgage loans and 4% of total loans. Although exposure to the bureau has been an area of concern for investors recently, he said the bank is in a relatively good position because of its long-term value and designation of Texas as the beneficiary of the immigration. — CNBC’s Michael Blum contributed to this report.
Wolf double-promoted this regional bank’s stock which is an “attractive hiding place”