Translation: Original published in Finnish on 5/11/2026 at 8:29 am EEST.

Mandatum's most important income line, fee result, was below our Q1 estimate, but this did not cause a material change in the company's outlook. Despite the strong growth outlook, we still consider the stock highly priced, so we reiterate the Reduce recommendation. However, we revise our target price to EUR 6.4 per share (was EUR 6.3) in line with our dividend model.

Earnings miss was mainly due to quarterly fluctuations in balance sheet investments

Mandatum published a Q1 result that was clearly below our expectations. This was mainly due to a larger-than-expected net finance loss, which is not particularly relevant to investors. However, fee result, which is the most important item for the Group's value, also decreased from the previous quarter and fell somewhat short of both our and consensus expectations. This was partly due to timing-related factors, although the company's growth investments also had a moderately negative impact on profitability in the short term. However, we do not see a material change in the company's scalable growth story. Wealth and asset management sales continued to perform strongly, which underlines the good competitiveness of the company's products.

Asset management is the Group's long-term earnings driver

We now estimate that Mandatum's profitability will scale significantly for several more years, whereas previously we had estimated this to be most pronounced in 2026. As a result, our fee income forecasts for 2026–2027 decreased, but our longer-term forecasts increased.  However, the decrease in 2026 forecasts is mainly due to weak Q1 investment income. Our earnings forecasts for the Group for 2027–2028, on the other hand, remain almost unchanged.

Overall, we expect Mandatum's Group-level profit to bottom out in 2026. For 2027, we expect strong earnings growth as investment income normalizes and fee income continues its robust growth. Going forward, we expect the Group's earnings to continue growing, but at a more moderate rate. 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 in our forecasts. 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 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 for the stock are too demanding

Mandatum’s expected return relies heavily on high dividend returns. 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 6.4 for Mandatum (was EUR 6.3). The increase from our previous update is explained by a rise in long-term (2027-) growth estimates. According to our dividend model, the value is below the share price, so we consider the share to be fully priced. Also, when looking at the sum-of-the-parts, Mandatum's asset management is priced at a significant premium relative to its domestic peers, which sets an extremely high bar for performance. However, the high dividend yield also limits the share's downside, and, with excellent operational performance continuing, there are no clear downward drivers for the share.