United Bankers H2: H2 went well, new sales under scrutiny

Translation: Original comment published in Finnish on 2/12/2024 at 7:12 am EET

United Bankers will report its H2 results on Friday at 9:00 am EET. The company has maintained its fairly strict guidance unchanged, and the risk of an earnings disappointment in particular is quite small. In addition to numbers, focus in the report is on new sales and the outlook. As a whole, we expect the second half of the year to have gone well for the company despite the challenging market. The first UB live in history can be watched on InderesTV starting at 08:50.

Good sales supports revenue growth

We predict that United Bankers’ revenue will grow slightly from the comparison period to 26.6 MEUR. Asset management fees will increase by 5%, driven by recurring management fees. During 2023, the company’s new sales have progressed well considering the circumstances, and expecially the successful launch of the FIGG fund at the end of H1 was an important milestone. We estimate that AUM will be slightly over 4.7 billion and will grow marginally from H1. According to our calculations, the recurring fees from funds will increase by 13% to 14.3 MEUR. Performance fees will also be at a strong level due to the strong returns in forest funds. We estimate that performance fees will be 5.8 MEUR. The sluggish transaction market is still reflected in revenue and the fees from asset management and investment bank operations are at the level of the comparison period.

The result should be quite well known

UB has maintained its guidance (EBIT is close to 2022 levels), and thus there is only limited uncertainty in the result. We estimate that the guidance range is approximately 10% in both directions, and therefore the H2 EBIT should be in the 8-11 MEUR range. Our own forecast is 8.9 MEUR and an EBIT margin of 34%. We believe that this level is good considering the weakness of the transaction business. As is typical of UB, the blemish of the result is its significant reliance on performance fees, which represent a considerable share of the Group’s total result. However, the profitability based on recurring fees in asset management should improve clearly in H2 as recurring fees have grown (H2’23e: 22% vs. H1’23: 11%). This is one of the most interesting figures in the report, as the profitability improvement based on recurring fees from Asset management is the single most important value driver for the share.

We expect UB to continue steadily increasing its dividend and predict a dividend of EUR 1.0 per share (2022: EUR 0.9). Based on the balance sheet, the company could afford to pay more dividends but we believe it aims for a steadily increasing dividend.

The guidance and new sales figures make the report morning interesting

Our focus in the report is on the company’s new sales. The company is currently raising funds for three major funds (FIGG, Nordic Forest Fund 4 and UB Renewable Energy), and all we know so far is that sales of Renewable Energy has started off reasonably. These funds will play a significant role in UB’s earnings growth over the next few years, especially as the sales outlook for real estate funds that used to be the cash cow is very subdued in the short term. We expect the fundraising to have been reasonable despite the challenging market.

Although the predictability of UB’s business is not among the best of the asset managers we cover due to high performance fees, the company has managed to issue surprisingly accurate guidances in recent years. We expect the same line to continue this year, and expect the company’s guidance to be that the result will remain roughly at the level of the comparison period. Earnings growth guidance at this stage of the year would be a clear positive signal, as it would indicate the company’s confidence in a significant increase in recurring fees in 2024 (the visibility of performance fees is non-existent at this time of the year).