Jefferies Downgrades Associated Bancorp to Hold (ASBC)

Jefferies is out with a research report this morning, where it downgrades shares of Associated Bancorp

to Hold, from Buy; it has a $16.00 price target on the stock. The Jefferies analysts cited valuation as the main culprit for the downgrade as Associated has closed the valuation gap with peers. The stock now trades at 10.8x normalized earnings and 1.6x tangible book value, which is in line with the group. While some modest multiple expansion is possible from these levels, the analysts believe that the upside is limited at this point. As for valuation, the analysts remarked, “Our price target of $16 is established by applying a 14x multiple to out normalized earnings estimate of $1.40 (discounted two years at 10%). The applied multiple is one turn higher than the bank's historical forward multiple (2001 - 2007) to account for meaningful excess capital.”