On Mar 31, 2020, we issued an updated research report on Associated Banc-Corp (ASB - Free Report) . The company’s inorganic growth strategy and a solid liquidity position are expected to continue to support profitability.
However, lower interest rates, which are expected to put pressure on the company’s net interest margin (NIM) and elevated expenses make us apprehensive.
Moreover, the Zacks Consensus Estimate for its current-year earnings has been revised 16.9% lower over the past 30 days, reflecting that analysts are not optimistic regarding its earnings growth potential. Thus, Associated Banc-Corp currently carries a Zacks Rank #3 (Hold).
Its price performance is also not encouraging. Shares of the company have lost 42.1% in the past year compared with a 30.9% decline of the industry.
Looking at its fundamentals, Associated Banc-Corp’s net interest income (NII) witnessed a CAGR of 4.2% over the last six years (2014-2019). Moreover, continuous change in deposit mix, backed by rising non-interest-bearing deposit accounts, has been impressive.
Recently, the company completed the acquisition of First Staunton Bancshares. In June 2019, it acquired 32 branches in Wisconsin. In the first half of 2018, it acquired Anderson Insurance, Diversified Insurance Solutions and Bank Mutual. The deals are expected to be accretive to its earnings.
Further, given a strong balance sheet position and earnings strength, the company is expected to continue enhancing shareholder value through efficient capital deployments. It has been raising dividends on a regular basis, with the latest one announced in October 2019. Further, in December 2019, the company announced an additional share repurchase authorization of up to $150 million.
However, Associated Banc-Corp’s NIM is expected to be hurt to some extent in the near term due to near-zero interest rates amid the Federal Reserve's accommodative monetary policy. In fact, because of a decline in yield on loans and the rate cuts last year, its NIM moved down year over year in 2019, following increases in 2018 and 2017.
Moreover, the company has been witnessing a consistent rise in non-interest expenses. While expenses declined in 2019, the same witnessed a CAGR of 3.2% over the last six years (2014-2019). The rise was mainly due to higher personnel costs and technology expenses. Given its inorganic growth efforts and continued investment in franchise, overall costs are expected to remain elevated in the near term.
Stocks That Warrant a Look
A few better-ranked finance stocks are mentioned below.
Virtu Financial, Inc.’s (VIRT - Free Report) Zacks Consensus Estimate for current-year earnings has been revised upward by 63.8% over the past 60 days. The company currently sports a Zacks Rank #1 (Strong Buy).
The consensus estimate for earnings of Focus Financial Partners Inc. (FOCS - Free Report) has been revised 1.4% upward for the current year over the past 60 days. The company presently carries a Zacks Rank #2 (Buy).
Northrim BanCorp Inc. (NRIM - Free Report) has witnessed upward earnings estimate revision of 27.1% for 2020 over the past 60 days. The stock currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
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