Comparing Prosperity Bancshares (NYSE:PB) & M&T Bank (NYSE:MTB)

M&T Bank (NYSE:MTB) and Prosperity Bancshares (NYSE:PB) are both finance companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, earnings, risk, profitability, analyst recommendations, dividends and valuation.

Valuation and Earnings

This table compares M&T Bank and Prosperity Bancshares”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
M&T Bank	$9.83 billion	3.33	$2.85 billion	$18.94	11.95
Prosperity Bancshares	$1.74 billion	4.09	$542.84 million	$5.77	12.20

M&T Bank has higher revenue and earnings than Prosperity Bancshares. M&T Bank is trading at a lower price-to-earnings ratio than Prosperity Bancshares, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

M&T Bank has a beta of 0.56, suggesting that its share price is 44% less volatile than the S&P 500. Comparatively, Prosperity Bancshares has a beta of 0.63, suggesting that its share price is 37% less volatile than the S&P 500.

Dividends

M&T Bank pays an annual dividend of $6.00 per share and has a dividend yield of 2.7%. Prosperity Bancshares pays an annual dividend of $2.40 per share and has a dividend yield of 3.4%. M&T Bank pays out 31.7% of its earnings in the form of a dividend. Prosperity Bancshares pays out 41.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Prosperity Bancshares has increased its dividend for 27 consecutive years. Prosperity Bancshares is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

84.7% of M&T Bank shares are owned by institutional investors. Comparatively, 80.7% of Prosperity Bancshares shares are owned by institutional investors. 0.4% of M&T Bank shares are owned by company insiders. Comparatively, 4.0% of Prosperity Bancshares shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for M&T Bank and Prosperity Bancshares, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
M&T Bank	1	13	8	0	2.32
Prosperity Bancshares	2	7	5	0	2.21

M&T Bank currently has a consensus price target of $255.97, suggesting a potential upside of 13.06%. Prosperity Bancshares has a consensus price target of $78.36, suggesting a potential upside of 11.28%. Given M&T Bank’s stronger consensus rating and higher possible upside, research analysts plainly believe M&T Bank is more favorable than Prosperity Bancshares.

Profitability

This table compares M&T Bank and Prosperity Bancshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
M&T Bank	22.72%	11.80%	1.42%
Prosperity Bancshares	29.95%	7.39%	1.43%

Summary

M&T Bank beats Prosperity Bancshares on 9 of the 17 factors compared between the two stocks.

About M&T Bank

M&T Bank Corp. operates as a bank holding company, which engages in the provision of retail and commercial banking, trust, wealth management, and investment services. It operates through the following segments: Commercial Bank, Retail Bank, Institutional Services and Wealth Management, and All Other. The Commercial Bank segment offers a wide range of credit products and banking services to middle-market and large commercial customers, mainly within the markets served by the company. The Retail Bank segment refers to the services to consumers and small businesses through the company’s branch network and several other delivery channels such as telephone banking, internet banking, and ATMs. The Institutional Services and Wealth Management segment relates to helping high net worth individuals, institutions, and families grow, preserve, and transfer wealth. The All Other segment reflects other activities of the company that are not directly attributable to the reported segments. The company was founded on August 30, 1856 and is headquartered in Buffalo, NY.

About Prosperity Bancshares

Prosperity Bancshares, Inc. operates as bank holding company for the Prosperity Bank that provides financial products and services to businesses and consumers. It accepts various deposit products, such as demand, savings, money market, and time accounts, as well as and certificates of deposit. The company also offers 1-4 family residential mortgage, commercial real estate and multifamily residential, commercial and industrial, agricultural, and non-real estate agricultural loans, as well as construction, land development, and other land loans; consumer loans, including automobile, recreational vehicle, boat, home improvement, personal, and deposit account collateralized loans; term loans and lines of credit; and consumer durables and home equity loans, as well as loans for working capital, business expansion, and purchase of equipment and machinery. In addition, it provides internet banking, mobile banking, trust and wealth management, retail brokerage, mortgage services, and treasury management, as well as debit and credit cards. The company was incorporated in 1983 and is headquartered in Houston, Texas.