Associated Banc-p(ASB)2023-01-27 04:05Financial Data and Key Metrics Changes - In Q4 2022, net interest income increased by 9% quarter-over-quarter and 55% year-over-year, reflecting strong loan and deposit growth [9][10] - The return on common equity exceeded 16% for the quarter, driven by positive operating leverage and disciplined expense management [9][10] - For the full year 2022, net income available to common equity increased by 6% year-over-year despite a $121 million provision-driven headwind [10] Business Line Data and Key Metrics Changes - The construction loan portfolio led growth, primarily due to funding of prior commitments, while new production slowed [11][12] - Commercial loan growth was robust, with a 57% year-over-year increase in new customer relationships, contributing to the achievement of growth targets [13] - Consumer auto finance continued to produce high-quality loans, although production rates were intentionally slowed to reflect market conditions [14] Market Data and Key Metrics Changes - Average deposits grew by 2% quarter-over-quarter and 3% year-over-year, driven by core customer deposits despite inflationary pressures [15][16] - The competitive environment for deposits is expected to intensify in 2023, prompting strategic initiatives to cultivate customer relationships [17][19] Company Strategy and Development Direction - The company is focused on balanced loan growth across consumer and commercial segments, with an expectation of 7% to 9% total loan growth in 2023 [33] - Strategic investments in technology and talent are ongoing, with a commitment to maintaining expense growth below revenue growth [20][33] - The company aims to enhance its digital platform and customer acquisition strategies to drive deposit growth [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of midwest markets, with stable unemployment rates and increased consumer spending [7][8] - The macroeconomic outlook remains uncertain, but the company is positioned to benefit from rising interest rates while managing interest rate risk [23][24] - Expectations for net interest income growth in 2023 are between 15% and 17%, reflecting anticipated rate increases and balance sheet dynamics [24][33] Other Important Information - The company achieved a 41% increase in PTPP income for the full year 2022, underscoring strong revenue generation and expense management [20] - Non-interest income is expected to face pressure in 2023, with a projected decline of 6% to 8% due to market headwinds [26] Q&A Session Summary Question: What does the visibility look like into the pipeline heading into '23? - Management noted that growth in construction loans was due to funding prior commitments, with expectations for moderation in this category as new production is limited [35] Question: Where could margin sort of peak out? - Management refrained from predicting the peak margin but emphasized a focus on fundamentals driving durable margin [38] Question: Should we expect more activity in capital management? - Management indicated no changes to capital return strategies, focusing on dividends and organic growth [42] Question: How would NII trajectory look throughout the year? - Management suggested that while NII may see some quarterly compression, full-year guidance remains robust based on deposit growth initiatives [45] Question: What is the message of the new brand campaign? - The campaign will focus on aligning the company's messaging with customer needs, emphasizing digital relevance and product execution [76]