Magazine article American Banker

Associated of Wisconsin under Pressure to Cut Costs

Magazine article American Banker

Associated of Wisconsin under Pressure to Cut Costs

Article excerpt

By CHASE, BRETT

Back in 1997, Associated Banc-Corp of Green Bay, Wis., told investors that its acquisition of First Financial Corp. in Stevens Point would not be a slash-and-burn deal.

The combined company would be very cautious in cutting expenses, said Associated's chairman and chief executive, H.B. Conlon.

True to its word, the $11.3 billion-asset company said last month that merger and technology expenses continued to eat into earnings in 1998. What's more, the company did not make up for the higher expenses with additional revenue growth.

Associated earned $38 million in the fourth quarter on an operating basis, up 5% from the previous year. It lost $54 million in the 1997 quarter after merger and other one-time charges.

The company said while it met its own earnings estimates in 1998, it expects earnings to rise only modestly this year, because of slow revenue growth and high expenses. It said it expects revenues to improve and expenses to moderate in the second half of the year, though.

"The pressure is clearly on them," said Joseph Roberto, an analyst with Keefe, Bruyette & Woods Inc. "They have some time, but clearly the clock is ticking."

"There's kind of a double whammy where there's been a delay in revenue growth and a delay in expense savings," said Gerry Cronin, an analyst with McDonald Investments Inc.

Associated's go-slow approach to integrating its large merger is an anomaly. It is the same approach Norwest Corp. is using in its merger with Wells Fargo & Co., and opinions are split as to whether it is better. In the case of Associated, the deal has disappointed.

"The deal isn't on track. That's pretty obvious," said Bradley Vander Ploeg of Everen Securities Inc., Chicago. Mr. Vander Ploeg reduced his earnings estimates for the company this week and downgraded its stock. …

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