- Prosperity posted a relatively good fourth quarter, with the earnings beat relative to the Street balanced between a core pre-provision beat and lower credit costs.
- The bank beat expectations, but core PPOP was still down slightly from the prior quarter, spreads contracted, and loan balances contracted.
- Prosperity is over-capitalized, and management announced both a sizable buyback and its intention to pursue M&A transactions.
- Prosperity has never delivered particularly good organic loan growth, but its credit quality has been top notch and it has proven itself to be a skillful and disciplined acquirer.
- There are inherent risks trying to model future M&A, but if Prosperity can generate mid-to-high single-digit long-term core earnings growth through organic means and M&A, the shares look undervalued.
For further details see:
Prosperity Is Conservatively Run, But Back On The Hunt For Accretive Bank Deals