Umweltbank AG (DE:UBKG) is a play on Germany’s ongoing transition towards a low-carbon, resource-efficient economy. The bank’s long-term asset and earnings growth should continue to be driven by regulatory and public support of green construction and renewable energy (RE) projects. In this context, UBK intends to raise new subordinated debt to strengthen its capital base. UBK is one of the most profitable listed banks in the German-speaking region due to its low cost base and high credit quality. UBK’s shares trade at a P/BV 2018e of 1.2x, which looks low relative to its above-average ROE (we expect 11.5% in FY18).
Well positioned for the low-carbon transformation
UBK’s focus on financing sustainable projects allowed the bank to consistently outperform the broader banking sector in terms of asset growth over the last several years (2010–2017 CAGR at c 10%). The ongoing transition towards a low-carbon emission economy should continue to benefit UBK, with Germany’s ambitious target to generate more than 80% of electricity from RE sources by 2050 (vs 36% in 2017). Extensive expertise in funding both green construction and RE projects in the private sector, coupled with attractive lending terms (backed by development banks), should allow UBK to monetise this trend.
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