Translation: Original published in Finnish on 10/23/2026 at 8:11 am EEST.

Mandatum will publish its Q3 report on Tuesday, November 10. Ahead of the earnings release, we lowered our Q3 earnings estimate as we expect rising interest rates to weigh on the net finance result. At the same time, we raise our recommendation to Accumulate (was Reduce), as we believe the price tag for the company's international growth potential has dropped to a reasonable level. We reiterate our EUR 6.20 target price.

Estimate changes weighted towards net finance result

We lowered our net finance result estimate for the current year, as the rapid rise in interest rates weighs on our Q3 net finance result estimate. However, the significance of short-term volatility in the net finance result is negligible to the company's value. Meanwhile, the higher interest rate level will support the net finance result in the coming years, which is why we have slightly raised our net finance result forecasts for 2027–2028. Our fee result estimates, in turn, decreased very moderately after we lowered our Q3 estimates for the appreciation of assets under management. Overall, our earnings estimates for 2027–2028 remained virtually unchanged. We made no changes to our profit distribution estimates.

We expect fee result to have continued strong growth

We expect Mandatum's Q3 earnings to have fallen from the comparison period, weighed down by the net finance result. On the other hand, we expect fee result growth to have remained strong (+13% vs. Q3’25), driven by new sales and excellent cost control. Our Q3 estimate for Mandatum's profit before tax is 37.3 MEUR, and our EPS estimate is EUR 0.06.

With regard to new sales, we expect net subscriptions of approximately 150 MEUR (Q3'25: 160 MEUR), as the third quarter is typically seasonally weaker due to the vacation season, and increased uncertainty in interest rate markets has kept customers cautious, especially toward the end of the quarter, in our view. The longer-term sales picture remains very positive, and the elevated interest rate level supports the relative attractiveness of fixed-income products. Therefore, on earnings day, we will focus on management's comments regarding the sales outlook, particularly the development of international sales of fixed-income products. While we expect the comments to remain positive, the company is likely to highlight increased market uncertainty, similar to its peers. We expect client AUM to have increased by around 1% from the previous quarter, thanks to net subscriptions and slightly positive value changes. In the earnings call, we also expect more detailed comments regarding the Cliens takeover, now that the transaction has officially been completed.

Valuation has turned attractive

We have gauged the value of Mandatum primarily 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 remains at a value of some EUR 6.2 per share. However, we have fine-tuned our underlying assumptions. Following the rise in market interest rates, we raised the risk-free rate to 3.0% (was 2.5%), and our required return on equity is now 9.0% (was 8.5%). In the same process, we increased the growth assumption for the terminal period to 3.0% (was 2.5%), as we estimate that the higher interest rate level reflects higher economic growth expectations.

Since our last update, the share price has dropped below the value derived from our DDM, providing an expected return sufficient for a positive recommendation. At the same time, the high dividend yield limits the downside of the share. Using a sum-of-the-parts approach, the asset management valuation is certainly still demanding (P/E of 26x based on the current year's forecast, accounting for Cliens' annual earnings impact), necessitating continued strong earnings growth in asset and wealth management. In particular, the good growth outlook for international sales of fixed-income products supports our positive investment view.