Associated Banc-Corp long-term debt rating may be cut by Moody's

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Moody's Investors Services placed the long-term ratings and assessments of Associated Banc-Corp (NYSE:ASB) and its main bank subsidiary, Associated Bank, N.A, on review for a downgrade. ASB shares fell 1.5% in early Tuesday trading.

The company's long-term subordinated debt is currently rated at Baa1 (the third lowest investment-grade level) and it preferred stock non-cumulative are currently rated at Baa3, the lowest investment-grade rating. ASB's commercial paper rating is P-2.

The bank's short-term ratings of Prime-1 for deposits and P-2 for counterparty risk were affirmed and are not under review.

The review was prompted by the bank's recent decline in capitalization and liquid assets to total assets, resulting in levels that fell below the median for similarly rated peers, Moody's said.

As such, the review will focus on Associated's (ASB) capital and liquidity planning and strategy as well as risks associated with the bank's relatively new business verticals.

"Additionally, the bank has taken significant steps to diversify its revenue stream, such as its expansion into auto financing, introducing additional risks to the bank stemming from new business verticals that need to be assessed further," Moody's said.

Associated Banc-Corp's liquidity ratio, as measured by its liquid bank assets to tangible bank assets was 13% as of Sept. 30, 2022 vs. the peer median of 22.23%.

A company's credit ratings are important because they affect its ability to get financing at a lower cost. The stronger the rating the better the rate it can get when borrowing capital.

(Editor's note: A previous version of this story incorrectly said ASB's subordinated debt rating may be cut to junk.)

SA contributor Sheen Bay Research sees Associated Banc-Corp's (ASB) topline growth slowing but remains positive