Aktia: Time to move to sidelines for now

Translation: Original published in Finnish on 3/27/2026 at 8:12 am EET.

Uncertainty regarding economic development has clearly increased recently, and our assessment of Aktia's volume development is more cautious than before. At the same time, however, the rise in market interest rates supports net interest income, so overall our earnings forecasts for the coming years increased slightly. However, after the share price increase, Aktia's valuation is already neutral, so in a cloudy market environment, the expected return no longer appears attractive enough. We lower our recommendation to Reduce (was Accumulate) and reiterate our EUR 12.5 target price.

Market situation has contradictory effects

Uncertainty regarding inflation is again high after a relatively stable period, which has been reflected in a sharp rise in market interest rates. We have therefore raised our net interest income forecasts to reflect this. On the other hand, we estimate that rising interest rates and increased uncertainty will dampen the nascent recovery in the housing market and keep the corporate sector cautious. This led to a reduction in our loan portfolio growth forecasts for the coming years, as Aktia's banking business is entirely focused on the interest-rate-sensitive Finnish market. At the same time, we slightly revised downwards our forecasts for Aktia's fund net subscriptions for the current year, as we believe the increased risk level in emerging markets poses a clear challenge for new sales. In the longer term, we do not expect this to be detrimental, and the increase in return requirements may even support the attractiveness of the asset class. Overall, our earnings forecasts for the next few years rose moderately, supported by net interest income forecasts. Our dividend forecasts for the coming years, however, fell sharply, as the update to Aktia's credit risk models pushed our capital adequacy expectations significantly below the bank's target level.

Decent earnings growth outlook

Like the rest of the banking sector, Aktia's earnings have clearly improved due to rising interest rates. However, the trend has temporarily reversed, and in 2026, we expect comparable EBIT to still decline moderately. After this, we estimate that earnings will return to growth in line with business volumes and interest rate levels.

We estimate that the recovering loan demand will turn Aktia's loan portfolio to clearer growth only from 2027. Our growth forecasts for asset management, on the other hand, are moderate, reflecting the challenges in institutional sales. Achieving the ambitious growth targets (over 15% return on equity and 5% organic annual growth in net commission income), which largely rest on asset management, would require a significantly more favorable development than this. Although 2025 showed signs of improvement, there is still insufficient evidence of a shift towards more sustainable growth. However, Aktia's reported earnings are expected to continue growing in our forecasts for 2026, as one-off expenses significantly burdened the 2025 result. We expect Aktia's profit distribution to remain moderate in the coming years, as its solvency is below the target level. However, we estimate that the payout ratio will rise to approximately 80% in a few years, closer to the rest of the banking sector.

Valuation no longer attractive

We have examined Aktia's valuation through balance sheet multiples, the dividend model, and Nordic banking peers. The methods indicate a per-share value of EUR 11.0-13.8. We believe that a suitable anchor point for Aktia's valuation is still found in the middle of the range. Although our earnings estimates increased slightly, the dividend outlook is more moderate than before. In addition, high uncertainty and a weakening demand outlook warrant caution. The valuation multiples of the peer group have also decreased. Aktia's balance sheet-based valuation (P/B 1.4x) is quite neutral relative to our profitability forecasts. The expected return, consisting of the dividend yield and moderate earnings growth, is still not weak, but it is not enough to compensate for the increased uncertainty.