Edison Investment Research Limited
London, UK, 13 June 2019
Edison issues outlook on UmweltBank (UBKX)
UmweltBank (UBK) has successfully raised additional tier 2 capital from the Green Bond Junior issue and additional subordinated debt placed to an institutional investor last year. As a result, the bank's total capital ratio (TCR) at end-2018 reached 14.0% compared with UBK's regulatory requirement in 2019 of 12.0%. This created a solid foundation for prospective loan book growth and we now forecast the bank's loan book to expand at a CAGR of 7.8% over the next five years. New product launches could further support UBK's business growth, but we believe they will also result in a temporarily higher cost income ratio (35.9% in FY19e).
We have revised our valuation of UBK upwards from EUR11.3 to EUR13.0 per share, primarily on the back of raised new lending volume forecasts. Although the share price is close to our previous valuation, this still implies 13% upside potential. On our dividend expectation of EUR0.34, based on FY19e earnings, UBK now offers a dividend yield of 2.9% (compared to the sector average of 4.5%).
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