Aktia Q3'25 preview: No earnings growth yet

Translation: Original published in Finnish on 11/03/2025 at 08:21 am EET

Source: Inderes

We expect Aktia's earnings to have continued to decrease due to declining net interest income. We estimate that general loan demand remained relatively stable, meaning we do not expect the clear growth in the corporate loan portfolio seen in the previous quarter to have continued as briskly. We are keen to hear the new CEO's comments on the lending outlook, as the messages from macro data have remained mixed. In addition, our interest is focused on new sales in asset management, which is one of Aktia's key earnings growth drivers.

Credit demand and institutional asset management sales interest in the report

Aktia will report its Q3 results on Thursday morning around 8:00 am EET. We expect net interest income to have continued its decline both compared to the comparison period and moderately compared to the previous quarter. In loan demand, we expect moderately stable development, which should keep Aktia's loan portfolio in moderate growth. On the other hand, for both corporate and household loan demand, macro data shows a slight decline in Q3 from the positive development of previous quarters, which raises some concerns about the progress and timing of the nascent turnaround. Due to the high Finnish unemployment rate and the uncertain economic outlook, a clearer pick-up is likely to be delayed until next year.

We expect commission income to have been slightly below the comparison period, which is explained by lower assets under management than in the comparison period, in addition to other commission income that fluctuates quarterly, the significance of which to the group figures and Aktia's value is small. However, due to decent new sales of mutual funds and good capital market development, assets under management should be higher than in the previous quarter. While public data sources cannot be used to determine the movements of institutional clients under asset management mandates, their impact on the figures is moderate due to the modest fee level. However, to bolster the credibility of the asset management-based growth strategy, net subscriptions from institutional clients should be turned back to clear growth, where the newly appointed head of asset management, Pasi Vuorinen, has his work cut out for him.

We estimate that other items have developed quite steadily, so overall, we expect Aktia's operating income to fall below the comparison period due to the decline in net interest income.

Declining revenues depress earnings, as in the rest of the banking sector

We expect Aktia's comparable expenses to have decreased slightly from the comparison period, which is explained by the decrease in the depreciation level. Adjusted for this, we expect moderate expense growth, mainly driven by general cost inflation. However, reported total costs are increasing due to non-recurring costs from the ongoing transformation program (-1.5 MEUR per quarter).

We expect impairment losses to have remained at approximately the same level as in the previous quarter, at 3.0 MEUR (0.15% of the loan portfolio), which would mean an increase year on year. The estimate is still clearly higher than Aktia's historical levels, which is due to the increase in default of payments.

As a result of these factors, we expect Aktia's EBIT adjusted for non-recurring cost items for Q3 to have been 27.1 MEUR. Our estimate for the quarter's comparable EPS is EUR 0.28, which would represent a reasonable return on equity of  11%. However, the level is modest compared to Nordic banking peers.

No material changes expected in the outlook

Aktia's current earnings guidance includes an expected decline in comparable operating income (124.5 MEUR in 2024). The company expects its net interest income to decline in line with interest rates, while net commission income is expected to increase slightly. In addition, costs are rising due to IT investments and inflation. The company is likely to reiterate these estimates in its Q3 report, as there is no immediate outlook for a turnaround in earnings growth. On the other hand, due to slightly reduced asset management fee income, Aktia may have to cancel its fee income growth expectations.

We expect Aktia's solvency to have decreased slightly from the level at the end of Q2, as the company has commented that the abandonment of the internal calculation model will reverse a large part of the positive solvency effects of the regulatory revisions that came into force at the beginning of the year.