On Dec 29, 2014, we issued an updated research report on Associated Banc-Corp (ASB). Sustained improvement in the top line along with appreciable growth in loans and deposits continued to be the company’s strength while weak expense management remained a dampener.
In Dec 2014, Associated Banc-Corp transferred the listing of its common shares from the NASDAQ to the NYSE. The company, which now trades under the new ticker symbol ‘ASB’, provides an array of banking and non-banking products and services to individuals and businesses via 200 banking offices serving more than 100 communities.
The consistent improvement in the financials of the Green Bay, WI-based Midwest bank could be witnessed in the 7.9% rise in total loans and 5.4% increase in total deposits in the first nine months of 2014. This helped enhance the revenue generation of the bank – which was reflected in the 5.8% rise in net interest income during the same time period. However, the 7% decrease in non-interest income subdued the top-line growth to some extent.
Moving onto Associated Banc-Corp’s capital deployment activities, in Oct 2014, the quarterly cash dividend was hiked 11.1% to 10 cents per share. In addition, a proficient share repurchase program reflects the bank’s initiatives to return capital to shareholders.
On the flip side, non-interest expenses have been increasing over the last three years, with a 1.2% rise in the first nine months of 2014. This calls for an improved expense management by the bank to ease the pressure on profitability. However, expenses are expected to remain elevated in the near term driven by a persistent stringent regulatory environment and related compliance costs.
Associated Banc-Corp is well positioned for future growth on the back of sturdy capital position as well as strengthening credit quality. The investors’ confidence regarding the company’s future performance could be seen in the 7.4% gain in share price in 2014. However, we remain apprehensive due to high regulatory pressure and margin compression, which may continue to weigh on the bank’s profitability.
This can also be observed in the Zacks Consensus Estimate for 2014, which remained flat at $1.16 per share over the last 30 days and decreased marginally to $1.25 per share for 2015 during the same time frame.
Associated Banc-Corp currently carries a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Some better-ranked banks include Baylake Corp. (BYLK), Peoples Bancorp Inc. (PEBO) and First Financial Bancorp. (FFBC). While Baylake and Peoples Bancorp hold a Zacks Rank #1 (Strong Buy), First Financial Bancorp sports a Zacks Rank #2 (Buy).
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