Aktia's updated strategy relies on wealth management

Translation: Original published in Finnish on 2/27/2025 at 9:34 am EET.

This morning, Aktia published its updated strategy, which, as expected, focuses on increasing wealth management. At the same time, the bank updated its financial targets and ambitiously raised its ROE target to over 15%. In the afternoon, Aktia will host an investor event to further explain its strategy priorities, financial targets and the current state of its business. The event, which will start at 12.30 pm EET, can be streamed here.

Wealth management at the heart of the strategy, as expected

The focus of the updated strategy on wealth management and its growth is not surprising, as this is a more important source of income for Aktia than for many of its peers. In addition, wealth management sales have been very sluggish in recent years, so a turnaround would be needed as interest income declines. What’s more, there is considerable growth potential in wealth management compared to banking (lending, payment services, etc.). Banking was not even discussed in the press release, which underlines the role of wealth management in Aktia's plans for the future. In wealth management, Aktia relies on personal service, which will be extended to a wider customer base.

The financial targets are ambitious

Aktia's new financial targets are 1) a comparable return on equity of over 15% by the end of 2029, 2) assets under management of over 25 BNEUR by the end of 2029, 3) an organic net commission income growth of over 5% per year and 4) a CET1 solvency ratio of 2-4% above the regulatory requirement.

According to our calculations, the AUM target would require an average annual growth rate of more than 12%. Of course, it should be noted that the target reported by Aktia is now based on gross AUM (previously reported as net only). Therefore, the figures are not necessarily comparable with historical growth rates. In any case, achieving this target will require a significant upturn in new sales, as progress cannot depend on positive valuation changes. To support the growth, the company has also launched an acceleration program, which aims to generate a positive earnings impact of 20 MEUR by the end of 2026. We interpret this as being related to wealth management, where organic growth should also provide significant support to the earnings level. This is a run-rate figure, so the impact will not be as large in the current financial years. No concrete measures were announced yet, so we hope to hear more about the measures to turn the sales tide at today's investor event. The net commission income growth target is a logical consequence of the AUM growth.

The ROE target is also very ambitious, as Aktia's best performance in recent years has been just over 13%. Thus, there is still a lot of room for improvement, as the interest income trend points downward in the coming years. Achieving this target would require a significant correction in cost efficiency, in addition to the increase in wealth management. Indeed, our own forecasts are well below this target.

Dividend policy remains cautious

The dividend policy did not undergo any major changes, as Aktia will continue to distribute approximately 60% of the profit for the reporting period in the form of dividends. However, the door was opened for additional dividends (or purchases of own shares) in order to distribute excess capital on the balance sheet to shareholders, if necessary, and thus keep capital adequacy within the target range. However, the target range for the CET1 is a very conservative 2-4% above the regulatory requirement (cf. Nordea 1.5%). While this reduces the risk on the bank's balance sheet and keeps the required return moderate, it also reduces the bank's return on capital. At the end of the financial year just ended, the buffer was 1.8%, so it is unlikely that there will be any additional profit distributions in the next few years.