Translation: Original published in Finnish on 5/18/2025 at 7:45 pm EEST.

United Bankers' start to the year has been slow, as market uncertainty has weighed on assets under management and made new sales more difficult. As a result of our lowered estimates, we are revising our target price to EUR 17.0 (was EUR 18.0) We are still positive on the company's long-term outlook, but in the short term, there are few share price drivers as earnings are going in the wrong direction and the valuation is neutral. Thus, we reiterate our Reduce recommendation and will wait for signs of a return to earnings growth.

Slow start to the year

UB's net subscriptions to open-ended funds have been slightly negative in the beginning of the year, and in addition, the values of open-ended funds have decreased by about 10% along with the market. Of the limited partnership funds, UB Asuntorahasto and Nordic Forest Fund IV are currently raising capital, but we also believe that their sales have been sticky in the first half of the year. UB has characteristically become active in structured products as the market has been turbulent, and structured product sales have likely performed well, but its importance to the group is very limited (a few percent of revenue). The company's asset management sales performed very well in H2, and it would be desirable for this positive momentum to have continued, as new sales seem to be largely on the shoulders of asset management, at least for H1.

Forecasts revised downwards in line with the sluggish market

We have lowered our forecasts due to weaker-than-expected new sales and a decline in assets under management in line with the market. Overall, our forecasts for the next few years have decreased by 3-7%. This year, UB's earnings will decline significantly as performance fees fall from the exceptional level of the comparison period. We would like to point out that our forecast for the current year still includes substantial performance fees of around 10 MEUR. Performance fees mainly come from forest funds, and visibility into them is limited. Despite expectations of weaker sales, we still expect the profitability of continuing operations to improve from the weak level of the comparison period. The absolutely and relatively weak level of profitability adjusted for performance fees has for some time been a clear flaw in the company's otherwise excellent growth story, and it is of vital importance for the company to get this development back on track.

We expect the company to return to strong profit growth from 2026 onwards as new sales accelerate and profitability from continuing operations improves. Overall, we believe that UB's long-term earnings growth prospects are good, and that the company is executing its strategy properly. Our forecasts mainly entail two risks: the high revenue share of forest funds and the normal long-term level of performance fees. We expect the dividend to continue to grow steadily and, with a strong balance sheet, we believe the company will pay a dividend in excess of its earnings next spring to keep its dividend growing.

Without earnings growth, there are few upside drivers

Based on our forecasts for the current year, UB's P/E ratio (~17x) is relatively high. In 2026, rapid earnings growth will neutralize the multiple to 14x. UB has been valued at an average P/E ratio of 14x over the past five years, and we believe this level is reasonable and justified by the company's low investment needs, earnings growth prospects, and the current risk level. Compared to its peers, the stock is priced at a low premium, indicating a weak upside. It’s therefore difficult for us to see upside in it until we see the depth of the earnings slump and, on the other hand, the timeline for a return to earnings growth. In our opinion, the strong and relatively safe dividend yield of over 6% limits the downside of the share.