Aktia Q1'25 flash comment: Net interest income declined slightly more than expected

Translation: Original published in Finnish on 5/7/2025 at 9:27 am EEST.

Aktia published its lower-than-expected Q1 report this morning. This was due to the income side, with the net interest income in particular falling slightly faster than expected. However, there is no big drama associated with this, as the direction is known to be downward. Asset management sales, on the other hand, were a clear disappointment, with net subscriptions remaining well in the red. As expected, the company did not adjust guidance and still expects comparable EBIT to be lower than last year.

Income down more than expected

Aktia's operating income in the first months of the year was slightly below our expectations in almost all lines. The biggest deviation from forecasts was in net interest income. The loan book, in turn, decreased by 0.5% from the year-end, so there has been no significant pick-up in lending so far.

Commission income was also slightly weaker than expected. The main reason for the deviation from the forecast was the quarterly fluctuations in brokerage fees. Meanwhile, assets under management in the asset management business declined slightly, by a surprising 4% (net), as redemptions by domestic institutions remained high, similar to the level at the end of last year. This was the most obvious disappointment in the report.

Aktia's total income in Q1 was 73.5 MEUR, falling short of our forecast by about 4%.

Profitability declined with income

Aktia’s comparable operating expenses in Q1 were slightly below our expectations. This was due to the depreciation level, which fell more than expected after last year's write-downs. Similarly, restructuring costs were slightly higher than expected. As a result, total reported costs were slightly above our forecast.

Credit losses were again higher than expected, but still moderate (2.9 MEUR or 0.14% of the loan book). The quality of the loan book deteriorated again, with the number of loans overdue by more than one month in particular increasing markedly since the turn of the year. This may point to rising credit losses in the coming quarters.

Adjusted earnings per share were EUR 0.33 and the comparable return on equity was 13.5%. The year-on-year deterioration was significant, which means that, as expected, Aktia's results, like those of the rest of the banking sector, have also taken a hit from the decline in interest rates and the moderate increase in cost levels.

Guidance unchanged

As expected, Aktia did not alter the guidance or its underlying assumptions in the Q1 report but still expects a declining comparable EBIT (124.5 MEUR in 2024).

The bank's solvency increased exceptionally (CET1 ratio +1 pp) as a result of the regulations that came into force at the beginning of the year. However, Aktia commented that the impact will be temporary as the company will switch to the standardized approach to credit risk for corporate exposures during Q3. This will largely offset the positive effect now seen. The bank's core common equity tier 1 ratio (CET1) was 13.0%.