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Associated Banc-Corp Outlook Upgraded to Stable by Moody's
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AssociatedBanc-Corp’s (ASB - Free Report) ratings outlook has been upgraded to stable from negative by Moody's Investors Service, a rating arm of Moody's Corporation (MCO - Free Report) . The rating agency had lowered the outlook last year following the continued slump in energy prices.
At that time, Moody’s had downgraded ratings of BOK Financial Corp. (BOKF - Free Report) , Hancock Holding Co. and Cullen/Frost Bankers for similar reasons.
Further, the ratings of Associated Banc-Corp and its subsidiaries have been affirmed. The company's senior unsecured and subordinated debt ratings have been maintained at Baa1. Moreover, long-term and short-term deposit ratings for its subsidiary — Associated Bank, N.A. — have been retained at A1 and baseline credit assessment at baa2.
Reason for the Upgrade in Outlook
Improvement in profitability supported by rise in interest rates, cost control efforts and strong credit quality led Moody’s to upgrade Associated Banc-Corp's outlook. Per the rating agency, no change in the company's liquidity or capital positions is expected in the near term.
Moody’s projects loan loss provisions to remain at low levels, mainly driven by an improved performance of Associated Banc-Corp's energy loan portfolio, given the stable oil prices and a reduced exposure to energy sector loans.
Notably, Associated Banc-Corp expects asset quality to continue improving with oil and gas allowance decreasing gradually.
Why the Ratings are Affirmed
Per Moody's, Associated Banc-Corp has a strong liquidity position, given its stable deposit base. Further, the company is focused on strengthening its commercial as well as consumer client base in Wisconsin, Illinois and Minnesota.
Additionally, improving asset quality is a positive for the company. Associated Banc-Corp’s exposure to energy loans decreased to 27% of Moody's tangible common equity as of Sep 30, 2017 from 35% last year. The rating agency expects less probability of a rise in loan loss provisions for energy exposure.
Nonetheless, Moody’s pointed that Associated Banc-Corp’s relatively high exposure to commercial real estate remains a credit negative. Also, the company’s tangible common equity/risk-weighted assets ratio compares unfavorably with its peers, though it witnessed progress based on increase in earnings and steady capital deployments.
Notably, shares of Associated Banc-Corp have risen 7.6% over the past year, marginally underperforming the industry’s growth of 8.4%.
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Associated Banc-Corp Outlook Upgraded to Stable by Moody's
Associated Banc-Corp’s (ASB - Free Report) ratings outlook has been upgraded to stable from negative by Moody's Investors Service, a rating arm of Moody's Corporation (MCO - Free Report) . The rating agency had lowered the outlook last year following the continued slump in energy prices.
At that time, Moody’s had downgraded ratings of BOK Financial Corp. (BOKF - Free Report) , Hancock Holding Co. and Cullen/Frost Bankers for similar reasons.
Further, the ratings of Associated Banc-Corp and its subsidiaries have been affirmed. The company's senior unsecured and subordinated debt ratings have been maintained at Baa1. Moreover, long-term and short-term deposit ratings for its subsidiary — Associated Bank, N.A. — have been retained at A1 and baseline credit assessment at baa2.
Reason for the Upgrade in Outlook
Improvement in profitability supported by rise in interest rates, cost control efforts and strong credit quality led Moody’s to upgrade Associated Banc-Corp's outlook. Per the rating agency, no change in the company's liquidity or capital positions is expected in the near term.
Moody’s projects loan loss provisions to remain at low levels, mainly driven by an improved performance of Associated Banc-Corp's energy loan portfolio, given the stable oil prices and a reduced exposure to energy sector loans.
Notably, Associated Banc-Corp expects asset quality to continue improving with oil and gas allowance decreasing gradually.
Why the Ratings are Affirmed
Per Moody's, Associated Banc-Corp has a strong liquidity position, given its stable deposit base. Further, the company is focused on strengthening its commercial as well as consumer client base in Wisconsin, Illinois and Minnesota.
Additionally, improving asset quality is a positive for the company. Associated Banc-Corp’s exposure to energy loans decreased to 27% of Moody's tangible common equity as of Sep 30, 2017 from 35% last year. The rating agency expects less probability of a rise in loan loss provisions for energy exposure.
Nonetheless, Moody’s pointed that Associated Banc-Corp’s relatively high exposure to commercial real estate remains a credit negative. Also, the company’s tangible common equity/risk-weighted assets ratio compares unfavorably with its peers, though it witnessed progress based on increase in earnings and steady capital deployments.
Notably, shares of Associated Banc-Corp have risen 7.6% over the past year, marginally underperforming the industry’s growth of 8.4%.
Associated Banc-Corp carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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