Mandatum Q3'25: Performance is fierce, but so is the price

Translation: Original published in Finnish on 11/12/2025 at 8:45 am EET.

Mandatum’s Q3 result was significantly better than we expected due to income from the balance sheet investment portfolio. The figures for wealth management, the group's primary growth engine, also showed strong development, leading to a slight increase in our earnings estimates as well. Despite the strong growth outlook, we still consider the stock highly priced, so we reiterate the Reduce recommendation. We revise our target price to EUR 6.0 per share (was EUR 5.6) in line with our dividend model.

Asset management continued its clear earnings growth

Mandatum's most important figures, i.e., Institutional and wealth management new sales and cost efficiency, continued their strong development in Q3. Net subscriptions were 160 MEUR (1.1% of AUM), which can be considered an excellent performance, even compared to the figures reported by well-performing peers. In addition, the net finance result exceeded our expectations due to share returns, resulting in Mandatum's earnings clearly surpassing our estimates. Q3 profit before taxes was 55.7 MEUR (44.0 MEUR forecast), and EPS was EUR 0.09.

Strong profitability development also raised our earnings forecasts

Our earnings forecasts for the coming years rose slightly as we raised our fee income growth estimates following continued cost efficiency improvements in Q3 that exceeded our expectations. Additionally, our earnings forecast for the current year increased by about 10%, primarily due to earnings exceeding our expectations in Q3. Our sales forecasts for wealth and asset management remain unchanged following the Q3 report, and we expect new sales to remain very strong.

Overall, we expect Mandatum's group-level pre-tax profit to bottom out in 2026 and then grow gradually. While we anticipate a significant increase in Mandatum's wealth and asset management earnings, the decline in the investment portfolio will impede earnings growth, maintaining a moderate earnings growth rate for the group. However, the earnings mix is continuously improving as the share of wealth and asset management increases.

The flip side of the reduction in the investment portfolio is that profit distribution will remain generous, as Mandatum will return the funds released from this to its shareholders. In addition, we expect the company to distribute the capital released from the sale of Saxo Bank and Enento shares to its owners next spring, at which point solvency will also fall within the company's target range. In the coming years, the focus of dividend distribution will be strongly on returning excess capital, with accumulated earnings playing a smaller role. Consequently, our estimates indicate that the dividend per share will exceed earnings per share by a clear margin.

Expectations on the stock are too ambitious

We have gauged the value of Mandatum first and foremost by using the dividend discount model as it best reflects the company's high payout ratio and the unwinding of its overcapitalized balance sheet. Our DDM model indicates a value of some EUR 6.0 for Mandatum (was EUR 5.6). The increase from our previous update is explained by a rise in asset management profitability estimates. The value according to our dividend model is below the share price, so we consider the share to be fully priced.

Our sum-of-the-parts calculation also supports this view, as according to our calculations, capital-light businesses are already priced at a P/E ratio of around 30x at the current share price. While the higher valuation compared to peers is justified by the good growth outlook for returns and the clear, ongoing improvement in cost efficiency, this level leaves no room for missteps in the growth outlook. In our view, the current price tag for wealth and asset management would require the company to achieve even significantly stronger growth than its ambitious financial targets. However, the high dividend yield also limits the share's downside, and, with excellent operational performance continuing, there are no downward drivers for the share.