Mandatum Q2'25: Everything in shape apart from price tag

Translation: Original published in Finnish on 8/14/2025 at 11:10 pm EEST.

Mandatum's Q2 result fell short of our expectations due to accounting factors, but the figures for Wealth management, the most important growth engine, developed well again. Our long-term growth estimates were slightly raised due to the positive outlook for international growth, but lower interest rate expectations weighed on our near-term earnings estimates. Despite the strong outlook, we still consider the stock expensive, so we reiterate the Reduce recommendation. However, we revise our target price to EUR 5.6 per share (was EUR 5.3) in line with our dividend model.

Value-bearing Wealth management continued on expected trajectory

Mandatum's most important figures, i.e., Wealth management new sales and cost efficiency, continued their good development in Q2. Net subscriptions for the quarter were 164 MEUR (1.2% of AUM), which can be considered a good performance in a challenging market. However, reported result clearly fell short of expectations as interest rate changes weighed on net finance report contrary to our expectations. However, its significance for the company's value remains minor, as it is a purely accounting item.

The main focus of Wealth management sales was again on interest rate products. In addition, Mandatum announced that it would invest in its international sales by establishing a unit in Luxembourg to support its Continental European growth. The company also reported that it had gained its first customer from France, which serves as a good indication of the appeal of the company's interest rate products.

Outlook for international growth is better than before

Our near-term earnings forecasts declined, as we made downward revisions to our net finance result forecasts following market interest rate expectations. However, our longer-term earnings forecast increased, as we estimate international investments to support the sales outlook for Wealth management. In addition, the weaker-than-expected Q2 earnings clearly weighed on our current year earnings forecast.

Overall, we expect Mandatum's Group-level pre-tax profit to bottom out in 2025. This is a key update in the company's investor story, although primarily driven by downward revisions to net finance result forecasts. Nevertheless, in our view, the growth in Wealth management already offsets the earnings impact of the shrinking with-profit portfolio but contracting investment returns curb the Group's earnings development and keep earnings growth moderate. The earnings mix is constantly improving as the share of Wealth management increases.

Dividend distribution remains generous, as we expect the company to distribute all capital released from the sale of Saxo Bank shares to its owners next spring. Even after this, the dividend stream will remain strong as Mandatum returns funds released from the shrinking investment portfolio to its shareholders, which will result in the dividend per share exceeding the earnings per share by a clear margin. In the coming years, the focus of dividend distribution will be strongly on returning excess capital, with accumulated earnings playing a smaller role.

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 5.6 for Mandatum (was EUR 5.3). The change from our previous update is due to an upward revision to our long-term earnings estimates. Although the business outlook is excellent, the current share price already fully prices this in. We see the stock as fully priced and consider the expected return to be inadequate, even though the high dividend yield limits the downside of the stock.