Associated Reaffirmed at Neutral - Analyst Blog

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On Jul 5, 2013, we reiterated our long-term Neutral recommendation on Associated Banc-Corp ( ASBC ), based on impressive loan and deposit growth, along with improving asset quality and sound capital deployment activity. However, higher expenses and considerable exposure to commercial loans keep us apprehensive.

Why Neutral?

Associated's focus on its organic growth strategy has resulted in an increase in deposits as well as net interest income (NII) over the past several quarters. Further, the company continues to build capital, leading to a better financial position that will aid in fulfilling higher capital requirements. Moreover, meaningful capital deployment and consistently improving credit quality are the positives for Associated.

Nevertheless, increased non-interest expenses and significant exposure to commercial loans remain major causes of concern for the company. In addition, Associated's profitability remains subject to stringent regulations. Another issue that plagues the company is its limited exposure to markets.

Associated's first-quarter 2013 earnings marginally surpassed the Zacks Consensus Estimate. Lower operating expenses, partly offset by a reduction in top-line drove the results. The company is scheduled to announce second-quarter results on Jul 18.

The Zacks Consensus Estimate for the quarter is pegged at 25 cents per share. The Zacks Earnings ESP (Read: Zacks Earnings ESP: A Better Method) for Associated is +4.00% for the second quarter. This, along with its Zacks Rank #3 (Hold), makes it likely for the company to report a positive earnings surprise.

Other Stocks to Consider

Better performing Midwest banks include Old Second Bancorp Inc. ( OSBC ), First Interstate Bancsystem Inc. ( FIBK ) and Tower Financial Corporation ( TOFC ). All these stocks carry a Zacks Rank #1 (Strong Buy).



ASSOC BANC CORP (ASBC): Free Stock Analysis Report

FIRST INTST MT (FIBK): Free Stock Analysis Report

OLD SECOND BCP (OSBC): Free Stock Analysis Report

TOWER FINANCIAL (TOFC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ASBC , FIBK , OSBC , TOFC

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