United Bankers H1’24 preview: We expect a buoyant first half of the year

Translation: Original comment published in Finnish on 8/19/2024 at 7:29 am EEST.

United Bankers will report its H1 result on Friday, August 23, at around 9.00 am EEST. UB has had a very good start to the year, and we expect an excellent first half in terms of results. However, the strong earnings growth will come from performance fees, and we expect much more moderate growth in other businesses. Our focus in the report is, as usual, on the outlook for new sales, as the company is raising money for several funds of significant size.

Performance fees drive earnings growth

We predict that United Bankers’ revenue has grown by approximately 30% year-on-year to 32 MEUR. The core business Wealth Management continues to grow in continuous management fees (+6%), driven by forest funds and the UB Renewable Energy Fund. We estimate that assets under management have increased to around 4.7 BNEUR (2023: 4.6 BNEUR).

Performance fees will be at an exceptionally high level after UB announced at the beginning of the year that it will book 10 MEUR of performance fees for H1 from the sale of UB Nordic Forest Fund 2. In addition, we expect around 2 MEUR of performance fees from other forest funds. This explains our forecast of a significant improvement in the result relative to the comparison period. On the real estate side, UB will not recognize any performance fees, as the return on the funds has decreased significantly. In Corporate Finance, we expect activity to pick up slightly from the weak comparison period.

Profitability based on recurring fees will remain sluggish

We forecast UB's EBIT to have increased from the comparison period to stand at 12.5 MEUR, which would imply a strong EBIT margin of just under 40%. 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. In terms of profitability, it would be essential to increase profitability in terms of recurring fees as well. We do not expect to see a material improvement in this area in H1 yet, but the private equity funds in the fundraising stage should significantly improve this indicator at the end of the year. The development and outlook for sales of funds is therefore one of the focal points of the results day.

In addition to the fundraising progress, we are also interested in the state of the real estate funds, as UB has extended the redemption periods for its main real estate funds. We interpret this as increased redemption pressure, so we are interested to hear the management’s comments on the situation.

Guidance points to best result in company's history

In March, UB issued a positive profit warning in connection with the announcement of the NFF 2 forest fund's performance fees. The current guidance expects the company's EBIT to grow well above the 2023 level, which we estimate to be at least 20%. This means that, according to the new guidance, EBIT should be at least 20.3 MEUR at the lower limit of the guidance range. We estimate that the company has a buffer in its own forecasts relative to the lower end of the guidance, as the year was just starting at the time of the warning and visibility on performance fees for the rest of the year was limited. Overall, we thus expect UB to have by far the best result in its history this year.