Keefe Bruyette and Woods Downgrades Several Banks to Underperform

January 5, 2009 7:51 AM EST

Keefe Bruyette and Woods downgrades several banks from Market Perform to Underperform.

Keefe analyst says, "The Southwest banks have outperformed the industry over the last couple of years. However, looking into 2009, we believe precipitous decline in both oil and gas prices, the ongoing recession in the US and the later cycle credit exposure could put pressure on the premiums of the "safe haven" banks. We believe First Financial Bankshares (Nasdaq: FFIN), Prosperity Bancshares (Nasdaq: PRSP), Cullen/Frost Bankers (NYSE: CFR), Southside Bancshares (Nasdaq: SBSI) and Southside Bancshares (Nasdaq: BANF) are "safe haven" banks and deserve to trade at a premium to the overall market. However, the Southwest is not immune to this credit cycle and we expect these high valuations will come more in-line with the KRX. Therefore we are downgrading PRSP, CFR, SBSI and BANF from Market Perform to Underperform bringing the ratings in-line with FFIN, which is already at Underperform."

Keefe lowers price target on BANF from $45 to $39, $52 to $43 on CFR, $39 to $38 on FFIN, $35 to $24 on PRSP and $21 to $20 on SBSI.

First Financial Bankshares, Inc. is a financial holding company. The Company, through its wholly owned subsidiary, First Financial Bankshares of Delaware, Inc., owns 10 banks, a trust company and a technology operating company.

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