Morgan Stanley analyst Manan Gosalia downgraded Prosperity Bancshares (NYSE: PB) from Overweight to Equalweight with a price target of $80.00 (from $85.00).

The analyst comments: “We are downgrading Prosperity (PB) to Equal-weight from Overweight in conjunction with our market competition analysis. Competition is ramping up within Prosperity's Texas footprint, pressuring both organic loan growth and expenses over the next several quarters. Valuation looks inexpensive versus historical levels at just 11.2x Consensus NTM EPS, but we see limited catalysts for outperformance over the next 12-18 months.

We expect Prosperity's organic loan growth to lag peers as competition intensifies. Intensifying competition within Texas, including from out of state banks, is resulting in less favorable pricing and structure for new loans which in many cases Prosperity is unwilling to underwrite. The bank is maintaining a more disciplined approach by deploying cash into new securities at 4.5%+ for a better risk-adjusted return, resulting in less loan growth than most of its peers. Three bank acquisitions thus far in 2026, Prosperity also expects to experience runoff of certain loans over the next 12-18 months, as is typical when it does a deal. As a result of these headwinds, we are modeling organic loans down about 2% through the end of 2027 versus 1Q26, compared to a 12% cumulative increase for peers.”

For an analyst ratings summary and ratings history on Prosperity Bancshares click here. For more ratings news on Prosperity Bancshares click here.

Shares of Prosperity Bancshares closed at $70.90 yesterday.