Wells Fargo upgrades Associated Banc-Corp (ACB +4.4%) to an Overweight rating with credit holding up and the bank having some levers to pull.

“We had been on the sidelines with ASB primarily as the bank worked through its energy exposure, which at only 1.7% of loans accounted for nearly all of the troubled credits pre-COVID. With progress on energy now well underway and COVID related credit and deferral activity significantly reduced, ASB meets the criteria for our long thesis of being overweight mid-cap banks with strong capital, stable credit and sustainable dividends (5.2% yield).”

“Deferrals at 4.4% of total loans were down 35% from peak levels as of 8/31, putting ASB in a strong position relative to its current ACL ratio of 1.53% ex. PPP. With credit trending well, we expect the recently announced expense initiative to drive better profitability, which we would expect to help narrow the current 25% TBV valuation gap.”

WF lifts its price target to $18 from $16, which represents 108% of estimated Q3 TBV, and is better aligned with peers.

The call is an outlier with 8 firms slotting ASB with a Neutral-equivalent rating and one firm having it with a Sell-equivalent rating.


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