United Bankers H1'25: We are still waiting for earnings growth to resume

Translation: Original published in Finnish on 8/21/2025 at 10:30 pm EEST.

UB's H1 report was clearly better than expected in terms of numbers. However, the earnings beat was largely due to performance fees, and changes in forecasts have remained minimal. 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. We revise our target price for UB to EUR 18.0 (was EUR 19.0) and reiterate our Reduce recommendation.

Performance fees driving earnings beat

UB's H1 revenue was 29.1 MEUR, significantly exceeding our forecast of 26.0 MEUR. The revenue overshoot is largely attributable to performance fees, which the company recorded from forest funds well above our expectations. Structured products also sold better than expected, explaining the remainder of the revenue outperformance. Fees for funds and asset management, the most important for the company's value, were in line with our estimates, growing by about 5%. Consequently, the significance of the revenue overshoot is quite minor. Due to the substantial revenue overperformance, earnings also surpassed expectations, amounting to 8.8 MEUR. Expenses were somewhat higher than we expected, but we believe this is due to growth investments made by the company. The main blemish of the report remains the profitability adjusted for performance fees, which is at a very modest level. However, we are confident that, once revenue finally returns to more robust growth, the company should be able to significantly improve this ratio.

Although new sales remained challenging during the review period, they exceeded our expectations ever so slightly. As expected, net subscriptions to funds were low, but asset management sales continued to show strong progress. Asset management sales have performed very well for some time now, reflecting the company's effective wealth management concept and successful hiring in recent years. Structured products also sold better than expected. The key challenge in new sales remains the modest sales volume of spearhead products.

Only minor revisions to estimates, back to earnings growth from 2026 onward

There were no surprises in the outlook, and the company was cautiously optimistic about the future. We made very limited changes to our forecasts in response to the H1 report. The increase in the 2025 estimates is solely due to the H1 earnings beat, and the positive estimates changes for 2025-2027 are less than 5%. We predict UB's results will take off in 2026 and the earnings decline in 2025 will be offset by 2027. As before, earnings growth will be driven by AUM growth in Wealth management, especially in strategically important funds (NFF, Renewable Energy and Forest). Real estate funds will slowly start to support growth from 2026 onwards, but the level of sales is more modest in our estimates than in previous years. Profitability based on recurring income will also begin to improve in the coming years as growth accelerates. The dividend will steadily grow in line with the company's dividend policy.

Valuation picture neutral, we remain on hold

UB's valuation level is neutral for 2025-2026, in both absolute and relative terms. In the long term, we believe the expected return on the stock is promising at current levels, but this requires the realization of our forecasted earnings growth. In the short term, there are few share price drivers as earnings are heading in the wrong direction and new sales are sluggish. In the short term, the expected return is limited to a dividend yield of over 6%, which does not sufficiently compensate for bearing the forecast risks. We will continue to monitor the situation from the sidelines and wait for earnings growth to resume.