On Jan 2, 2014, we reaffirmed our long-term recommendation on Associated Banc-Corp (ASBC) at Neutral. The company marginally outpaced third-quarter 2013 earnings.
We expect it to benefit from its organic growth strategy, efficient capital deployment activities and strong balance sheet in the upcoming quarters. However, stringent regulatory landscape and concentration risks arising from limited geographic diversification remain matters of concern.
Why This Stance?
Associated Banc-Corp’s third-quarter 2013 earnings of 27 cents per share beat the Zacks Consensus Estimate and the year-ago earnings of 26 cents. Results reflected growth in net interest income and lower operating expenses, partially offset by a fall in non-interest income.
Associated Banc-Corp’s increase in net interest income, loans and deposits over the past several quarters infuses strength into its organic growth strategy. Further, the company’s bottom line is expected to benefit from the continued improvement in asset quality. Moreover, the recent 12.5% hike in its quarterly dividend and its share repurchase program drives investors’ attention towards the stock.
However, Associated Banc-Corp’s margins are expected to be hit by its mounting non-interest expenses. Further, as the company operates in only 3 states – Wisconsin, Illinois and Minnesota, concentration risk is a major threat to its financial performance.
Additionally, over the last 60 days, the Zacks Consensus Estimate for 2013 and 2014 remained stable at $1.09 per share and $1.06 per share, respectively. However, Associated Banc-Corp currently carries a Zacks Rank #4 (Sell).
Other Stocks to Consider
Some better-ranked Midwest banks include First Interstate Bancsystem Inc. (FIBK), Mainsource Financial Group (MSFG) and First Financial Bancorp. (FFBC). First Interstate Bancsystem and Mainsource Financial carry a Zacks Rank #1 (Strong Buy) while First Financial holds a Zacks Rank #2 (Buy).
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