Banking & Finance

Analyst's 4 Top Texas Bank Stocks May Be the Best 2018 Buys

Prosperity Bancshares

This company may be somewhat more off-the-radar, but it offers tremendous growth potential. Prosperity Bancshares Inc. (NYSE: PB) has $22 billion in assets and is the second largest Texas-based bank by commercial deposits, or the sixth largest based on total deposits. Based in Houston, Prosperity offers a variety of traditional loan and deposit products to its customers, which consist primarily of consumers and small and medium-sized businesses.

The company posted solid third-quarter results, and the analysts noted:

Finding an acquisition remains a very high priority for the company and management is now willing to be more flexible with acquirees lending and corporate cultures. The company is making more proactive efforts to identify prospects. There has been a bit of a lull in discussions as targets wait to see what the tax reform package gets passed. Management is willing to be more flexible with its acquire credit standards and lines of business retention than in the past. There may be a stronger sense of urgency for some banks to partner with core deposit heavy, liquid balance sheet banks in the coming quarters.

Shareholders are paid a 2.01% dividend. SunTrust has a $77 price target, while the consensus target is $69.93. The shares were last seen at $71.60.

Texas Capital BancShares

This leading mid-cap bank also resides in a very strong area of the country economically. Texas Capital BancShares Inc. (NASDAQ: TCBI) is the parent company of Texas Capital Bank, a commercial bank that delivers highly personalized financial services to businesses and entrepreneurs. Headquartered in Dallas, the bank has full-service locations in Austin, Dallas, Fort Worth, Houston and San Antonio. With all those market showing outstanding growth, and economies stronger than much of the country, the opportunities for a local bank run by well-known Texans is huge.

Many Wall Street analysts see the company as a top pick, given loan growth and exposure to pending rate hikes as much of the loans are floating rate and commercial and industrial loans.

SunTrust recently raised the $95 price target to $100. The consensus target is $91.76, and the stock traded at $92.80.

These four top banks are in the red-hot state of Texas, where the economy is in great shape and the outlook for 2018 is very positive. Like other banks, they have marched higher, so it may make sense to buy partial positions now and see if things don’t come in some in the new year.

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