Prosperity Bancshares upgraded to Overweight at Stephens amid NIM tailwinds

As previously reported, Stephens upgraded Prosperity Bancshares to Overweight from Equal Weight. Upcoming Q2 results will include full impact of the Lone Star bank acquisition that closed April 1, so the firm expects additional noise around LLP expense and operating expense and doesn’t believe its operating EPS forecast of $1.26 is an “apples-to-apples comparison” with the non-GAAP consensus forecast of $1.21. Like many of its peers, the firm assumes slower organic loan growth in Q2, but adds that it suspects the pace of Prosperity’s buyback program could accelerate in Q2. The firm is forecasting 4 basis points of core net interest margin expansion in Q2 and expects additional core NIM tailwinds in the second half of 2024 and early 2025 due to paydowns of higher cost borrowings.