UmweltBank is a specialised lender with total assets of €3.7bn, providing financing of renewable energy projects, as well as loans for new construction or renovation of sustainable residential, community and commercial real estate.
UmweltBank’s (UBK’s) preliminary FY18 numbers confirm the continuation of healthy lending business and deposit base growth, but also further interest margin compression. The additional tier 2 capital raised recently (€45m in total) provides a solid foundation for further loan book expansion, which together with gradually diminishing pressure on margins could translate into UBK’s earnings momentum turning positive in 2020. The planned launch of new products in 2019 and 2020 (such as the sustainable consumer credit) may provide some additional tailwinds, but may also translate into a temporarily higher cost income ratio (CIR).
UBK’s focus on financing sustainable projects should continue to facilitate the bank’s growth in the long term, with Germany’s ambitious target to generate more than 80% of electricity from RE sources by 2050 (vs 36% in 2017). In the short term however, the recently introduced auction system aimed at encouraging more competition and cost effectiveness has led to some market uncertainty. The trend towards sustainability is also reshaping the German real estate industry and becoming the key driver of UBK’s new lending volumes, as illustrated by its H118 results.