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 (UBK) has successfully raised additional tier 2 capital from the Green Bond Junior issue and additional subordinated debt placed to an institutional investor last year. As a result, the bank’s total capital ratio (TCR) at end-2018 reached 14.0% compared with UBK’s regulatory requirement in 2019 of 12.0%. This created a solid foundation for prospective loan book growth and we now forecast the bank’s loan book to expand at a CAGR of 7.8% over the next five years. New product launches could further support UBK’s business growth, but we believe they will also result in a temporarily higher cost income ratio (35.9% in FY19e).
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 40% in 2018). 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 is becoming one of the key drivers of UBK’s new lending volumes.