Mandatum Oyj (MANTA) Earnings Call Transcript

Good morning, everyone, and thank you for joining Mandatum's Q2 2026 audiocast. My name is Lotta Borgström from Investor Relations, and I am pleased to be joined today by our CEO, Petri Niemisvirta; our CFO, Matti Ahokas; and as a special guest, the Head of Asset and Wealth Management, Janne Sarvikivi. During this audiocast, we will begin by presenting the highlights and key developments from Mandatum's second quarter of 2026. We will also comment on the announced acquisition of the Swedish asset manager, Cliens, which was communicated earlier this morning. Following the presentation, we will proceed to the Q&A session where you will have the opportunity to dial in with any questions you may have. Participants can also submit questions through the chat, which we will review the available time after the dial-in Q&A. As stated, Janne Sarvikivi is joining us for today's call and will be available to comment in particular on the transaction and answer related questions later in this audiocast. And with these remarks, I will hand over to Petri. Please go ahead.

Thank you, Lotta, and thank you all for joining us today. The second quarter was a strong one for Mandatum with good results across the board. Our capital-light profit before taxes increased by 32% year-on-year to EUR 27.1 million. This demonstrates the strength of our strategy and the continued growth of our core businesses. The market environment was supportive during the quarter. As a result, our client assets under management increased by 16% year-on-year to a record EUR 16.7 billion. Net flow remained solid at EUR 164 million and stayed at the same level as a year ago. The strong growth in assets supported our fee result, which increased by 21% to EUR 22.4 million. The group's profit before taxes more than doubled from the comparison period and reached EUR 79.1 million. The result was supported by a strong net finance result and good investment returns from our own with-profit balance sheet investments, particularly fixed income assets, benefiting from tightening credit spreads. Alternative investments and especially private equity investments also performed well. Let me then move on to the -- to client assets under management and net flow. Client assets under management reached a new record of EUR 16.7 billion at the end of June. Client assets increased not only in asset and wealth management, but also in our corporate and retail businesses, in which the equity weight of investment is typically higher. This broad-based growth highlights the importance of all our business areas for Mandatum's profitability and demonstrates the strength of our diversified business model. Net flow remained positive in all our key business areas during the first half of the year. Asset and wealth management generated the majority of net flows, while corporate also continued to contribute positively. In corporate business, sales of pension insurance products and personal funds remained at a good level. In retail, our cooperation with Pohjantähti continued to support risk insurance sales and investment product sales return to growth. Retail assets under management increased to more than EUR 4 billion. We are also encouraged by early signs of improving economic activity in Finland. A gradual recovery in the economy, including increasing M&A activity, is expected to support both our asset and wealth management business and our corporate customer business going forward. This creates new opportunities for client growth and advisory services. Asset and wealth management continued to deliver strong growth during the quarter. A particularly positive development was the continued success of our international institutional business. International institutional assets increased by 19% year-on-year, driven mainly by growth in Sweden. During the quarter, we also won our first clients in Italy, further strengthening our position in Europe. Private wealth management assets increased by 18% year-on-year and exceeded EUR 5 billion for the first time. Growth was supported by strong sales of discretionary mandates and continued client confidence. We are pleased with the strong momentum in this business. One of our strategy ambitions is to double our market share in Finnish private wealth management during the [ strategy ] period, and the current development shows that we are moving in the right direction. We have continued to invest in future growth through new hires, among others. While these investments temporarily increase costs, we believe they will accelerate growth and strengthen our position in the coming years. We also made excellent [ process ] in fundraising. During the quarter, Mandatum Credit Opportunities II raised more than EUR 300 million in its first closing, and Private Debt VIII secured over EUR 100 million of commitments. This demonstrates investors' trust in our expertise and long-term track record. Finally, a few words on profitability and efficiency. Our cost/income ratio remained at a healthy level of 49%. On a rolling 12-month basis, the ratio improved by 4 percentage points year-on-year. We have continued to invest in selected growth areas, especially within asset and wealth management. Despite these investments, we have maintained a very strong level of efficiency. Our fee margin remained stable at 1.12%. While business mix effects continue as asset and wealth management grows faster than other businesses, underlying product margins remain stable. This reflects good pricing discipline across our operation. Overall, we continue to see clear evidence that our business model is scalable. We are growing assets, increasing earnings, maintaining efficiency and investing for future growth at the same time. With that, I will now hand over to Matti, who will go through the financials in more detail.

Thank you, Petri. Let's now take a closer look at the second quarter result components. As pointed out, our fee result was up by 21% year-on-year with assets under management up by 16%, and both of these are at all-time high levels. Compared to Q1, our AUM was up by 8% or EUR 1.3 billion to EUR 16.7 billion. The main driver for this quarter was the strong market performance of our corporate and retail assets, which have a higher equity weight than our asset and wealth management segment. As Petri mentioned, the cost/income ratio of our client AUM was 49%, actually slightly down quarter-on-quarter. Our income was up in Q2, but increased growth initiatives in the capital-light business meant that costs in this area increased as well. This is in line with our business plan, as you know. It's worth noting that the overall cost control remains good. Our group total cost/income ratio continued to improve, and we're well in line with our overall annual cost growth target of around 1% until 2028. The net finance result was strong across the board in Q2, and I'll talk a bit more about this later on. And the result related to risk policies at EUR 5.1 million in Q1 was a significant improvement compared to last year. As you know, one of our key financial targets is to grow the capital-light profit before taxes by more than 10% annually by 2028 compared to 2024. Looking at the second quarter, the reported profit before tax was EUR 27.1 million or 32% growth versus Q2 '25. Although the comparison number in Q2 '25 was maybe a bit low, we are at the run rate above our long-term target growth. Looking at the segments, asset and wealth management profit grew by 19% year-on-year, driven by a 20% growth in the fee result. The corporate segment saw a significant profitability jump as the result related to risk policies increased due to higher CSM release. In addition, the AUM increased by 18%. The retail segment saw the largest increase in fee result or 32%. The fee result was positively impacted by the very strong AUM development in the quarter. Actually, the AUM was up by some EUR 400 million compared to Q1. And then, let's take a closer look at the group net finance result, which came in at EUR 55 million. As you all know, Q2 was a positive quarter in the financial markets, and this is also reflected in our client AUM. The with-profit investment return in the quarter at 2.5% was above the expected level. Fixed income credit makes up now as much as 79% of our own investment portfolio. In Q2, the return was positively impacted by mark-to-market adjustments from lower rates and tighter spreads. The portfolio mark-to-market yield was down by 20 basis points in the quarter to 4.7% but is significantly still above the cost of liabilities. Our equity portfolio return was 5.5% in the quarter, broadly in line with the market. We continued the portfolio derisking in line with our strategy, and now, listed equities amount to only 2% of the portfolio. One specific thing in the quarter was that private equity returns were very strong in the quarter, actually at 7%, and we are seeing clearly higher capital distributions from the portfolio. In Q2, the PE capital distributions were over EUR 40 million, much higher than the level in previous quarters. This supports the capital release in line with our plan. Our private credit portfolio has also continued a positive trend like we've seen in previous quarter. The real estate portfolio return was negative, and this was mainly due to a write-down of a single lease contract. Turning then to the other part of the net finance result or discounting and cost of liabilities. As you saw, market interest rates decreased slightly in Q2, and this had a EUR 21 million negative discounting impact. Remember also that this item also includes the profit sharing impact from the segregated portfolio. And the impact was unusually high in Q2 as the investment return from the segregated portfolio was unusually high here as well. As in previous quarters, it's nice to say that we continue to consistently generate capital. Organic capital generation was EUR 90 million or EUR 0.18 per share in Q2. This was the highest quarterly figure in the history of the group. Q2 was the third quarter in the history of Mandatum when the SCR from the with-profit business is smaller than the capital-light SCR. And this confirms and shows our clear transformation journey towards a high-ROE capital-light group. The group fully-loaded solvency ratio stood at 195%. This was down from 207% in Q1, but clearly still above our target range. The decline was mainly driven by the increased SCR from significant increase in client equity AUM and then the increase in the symmetrical adjustment factor, which was at the maximum level in Q2. And now back to you, Petri.

Thank you, Matti. Before we conclude today's presentation, I would like to briefly comment on our announced acquisition of the Swedish asset manager, Cliens. Cliens is a well-established Swedish asset manager with a strong investment performance track record and a highly respected brand among a broad client base. The company managed approximately SEK 36 billion of client assets and serves around 100 institutional clients and 30 distribution partners through a team of experienced investment professionals. The transaction increased Mandatum's footprint in the Swedish asset management market and supports our Nordic expansion ambitions. Sweden is the largest asset management market in the Nordics, and the acquisition strengthens our local presence and client reach there. The acquisition also enhances our product offering through complementary actively-managed equity products. One of Cliens' particular strength is its strong expertise and long track record in small and mid-cap equities. This complements Mandatum's existing strengths and broadens the range of investment solutions we can offer our clients. Also, we will look for opportunities over time to further broaden the distribution of Mandatum's own products. In addition, we believe that Cliens is an excellent strategy and cultural fit for Mandatum's. Cliens' active investment manage approach, quality of operations and strong client focus were important factors behind this transaction. The transaction is expected to complete by the end of year 2026, provided that we get the necessary approvals from the regulators. The announced acquisition does not change our financial outlook for 2026 or our shareholder payout target. This transaction is a very good example of how we are executing our strategy in practice. At our Capital Markets Day last year, we highlighted the international growth in asset management and the enhancement of our product offering as 2 key strategic priorities. The acquisition of Cliens supports both of these objectives and is a natural next step in this journey. Overall, second quarter confirms that our business is developing well and that we continue to execute successfully on our strategy. We entered the second half of the year from a very good position and continue to work towards our vision of becoming the fastest-growing asset and wealth manager in the Nordics. With that, I will hand back to Lotta.

Thank you, Petri. We will now move on to the Q&A session. Joining Petri and Matti, we also have Janne Sarvikivi available to answer questions, particularly regarding the announced acquisition of Cliens and our asset management business in general as well. Please dial-in or submit your questions via the chat.

[Operator Instructions] The next question comes from Vash Gosalia from Goldman Sachs.

I have 2 questions, please. The first one on Cliens and the acquisition there. So could you give us a little bit more color on how much it would add to your EPS? So I roughly calculate it's like EUR 9 million of bottom line. But then, do you see any upfront synergies from this acquisition? And also, the other point I was quite curious on getting your inputs on is, the fee margin at Cliens appears to be around 60 basis points as opposed to your around 1.12 percentage points. So could you just give us some sense of how does your fee margin then develop? Or do you basically see upside to the 60 basis points? So, that was the first part. The second just on Europe. Could you give us a sense of what's your near-term ambition over there? And any other countries outside of Italy that you're looking into?

Vash, it's Matti here. I'll take some of the questions on the financials of Cliens. Altogether, I think your numbers sound quite realistic on the financial impact. You should, however, remember that there's probably going to be some amount of purchase price adjustments regarding that. So, that might be a couple of millions. But I think the ballpark is correct. And in terms of the margins, the margins are actually pretty close to what we are reporting at the moment. Of course, it's a kind of definition question, how do you look at the kind of distribution costs? Are they a reduction of the margin? Or are they actually a cost? So I think that's probably the explanation. But the way we look at it, the margin should be fairly similar to what we're seeing at the moment on that side.

I think, Vash, you asked about the synergies. This is not an acquisition that we've made targeting cost synergies in the first instance. So that's not going to be a main concern for us. We're looking for sales synergies, top line synergies and ways to cooperate, but cost synergies are not a central part of the calculation here. And then, I think you had a question about Europe as well and our ambitions there. We intend to grow our business there in the similar fashion that we've done so far, taking it one step at a time and looking at the opportunities as we go along. Petri already mentioned in his opening pitch about the first clients we've now had from Italy and so forth. So it's a slow progression and -- but it will lead to the end result that we are after, which means growing our business there in a fashion that's favorable for the shareholders.

On Europe, could I just actually get a little bit more color on -- so what is your right to win or your USP when you're competing in the European market? Because presumably, there, you do not have the same sort of heritage or history that you have in Finland. So how do you then sort of create that proposal or proposition [ for it ] and compete with like larger international asset managers?

Petri here. So you are right with that. So basically, our brand recognition is extremely high in Finland and somewhat also increasing after this acquisition, of course, also in Sweden. But when it comes to Central Europe, it's not the brand recognition which is leading our business and supporting our business. I would say that it's a great expertise, long-term track, long-term team, which has been on place. So once we are competing with the large -- really big players and local players in Central Europe, it's just the performance and the track and the return what we can offer and stability in our businesses and teams. And that's what have already turned the business in those countries. So it's a clear thing that we have to be better than others in many ways in order to open the doors in the first place.

Our USP is really product excellence there. I mean, it's all about having a product that stands out, that has the track record Petri just described, and also, of course, then the fact that we have the right people opening up the right doors there. So our sales force needs to be very competent, which, of course, they are. So it's a combination of product excellence and then having the right connections, but it's not brand recognition, as you correctly pointed out.

The next question comes from Michele Ballatore from KBW.

So the first question is about the impact on the solvency from the acquisition of Cliens in Sweden. I mean, of course, my second question is, how should we look about the dividend expectation? Because I believe, I mean, current expectation sees dividend, let's say, be also part of your excess capital. So I mean, the EUR 64 million will go out, fund. So if you help us understand how to frame all these moving parts ahead of this -- the completion of this acquisition? And then, my second question is about the distribution abilities. I think we have discussed this that any M&A opportunity will primarily target distribution even outside Finland. So what kind of distribution -- attractive distribution capabilities we can -- you saw in this acquisition in this asset manager? And then, the third question, which is more curiosity as I'm Italian, and I'm very surprised you acquired clients in Italy. I mean, how did this happen in terms of the acquisition and what kind of client -- I don't know if you can mention the name, but what kind of client you were able to acquire in Italy?

Michele, it's Matti here. The solvency impact from the deal, obviously, as we've said, it's EUR 64 million. And typically, asset manager, the balance sheet is very small. The company has no debt, and that means that the real impact comes from the intangible assets and the deduction from own funds. And I think it's probably in the magnitude of roughly EUR 50 million impact altogether. And if you put it in the model would mean somewhere between 5 and maybe 7 percentage points on the solvency ratio. So quite manageable altogether for that side. In terms of the dividend payout, as I said, this will have no impact. We have sufficient liquidity in our parent company to finance this when the deal is closed. So this is not an issue at all. We are -- we have a lot of liquidity, and we have very little debt as well. So, that is not an issue for us at all. So, no impact for that, and we have the sufficient funds ready in cash and marketable securities already.

And then, it's Janne here. You had a question about the distribution and what this brings to the distribution of Mandatum's products and otherwise. I think it goes in both directions. First of all, of course, Cliens gains a very good distribution channel. They have a Swedish business. They are very strong in Sweden, but they have limited or no client exposure outside of Sweden. So we are able then to give them a path to Finland, to the rest of the Nordics and to Europe at some stage when we deepen our relationship and start distributing our products through our channels. And then, in the other direction, of course, we have a very good client base and very good client relationships in Sweden as it is. But of course, Cliens has been in the market for even a longer time. They have a bit of a different angle, different product palette. So they can now, of course, also then help us through opening doors, making sure that our products get the shelf life that they need to their customers, and that will help us to distribute our products. So, that I think...

How is distribution made, sorry?

How is distribution made?

Yes.

Well, both directly and through distribution platforms, if you talk about Cliens, how they distribute their products. And then, you had a question about Italy and the clients there. Of course, I can't comment on the name of the -- or the type of the client or clients that we have gained there. But the way we do it is basically the same way we do it in all the countries, through our own excellent salespeople who have the right types of contacts. And then, of course, we also use partners in some of the markets to help us distribute these products. And this is the way we work, and that's also the way we've succeeded in Italy now in the last quarter.

Yes. And if I may comment, so not customer name or client name, but it's clearly what we are doing outside of Finland, it's only institutional business. So it's an institution, of course, the customer in Italy. And like Janne said, it's -- we do have something special to offer to customers all over the Europe with certain asset classes, which are not that commonly known and offered in certain markets and extremely good track record on those products. So there's a combination of uniqueness and an extreme good track record. And of course, like Janne said, the right people to open the doors.

The next question comes from Antti Saari from OP Markets.

Well, most of my questions regarding Cliens have been asked, but I have one more to go. So looking at the figures that you gave in this release, they have been weakening in last year, even though asset management industry in general has performed quite nicely and going upwards. And on the other hand, assets under management for Cliens were lower at the end of June than they were at the end of last year. So what's behind this? And has these clients seen weakening performance for several years? Or is this just a short-term issue?

Thanks, Antti, for the question, Janne here. Yes, you're correct in pointing out that the AUM has declined slightly from year-end and that figures have been slightly weakening. The main factor behind this is, of course, the phenomenon we've seen in the entire Nordic market regarding small and mid-cap companies and the performance of those companies relative then to the rest of the markets. It's been a tough market to be in for the past couple of years, and it's been maybe particularly tough in Sweden. And despite this, I think Cliens has done a very good job in retaining clients and making sure that their performance is as good as possible. And of course, we think that, that entire market segment of small and mid-cap companies is something where we can add value to customers because it requires research capabilities. It requires analytical knowledge. It requires a very high level of professionalism from the PMs and the analysts. And we think that Cliens has all of these. And it's a market segment and sector that we think will come back. And we strongly think that when it does and even in the face of some headwinds, Cliens can benefit from this.

Okay. That's clear. Then one a bit technical question for Matti. I thought that your solvency requirement rose fairly clearly in Q2 compared to Q1. And in the report, there was mentioned this symmetric assumption of equity holdings. But was there also something else that impacted your solvency requirement?

Yes. Antti, that's absolutely correct that it actually came down quite a lot. But then think about it that our assets under management and mainly on the equity side, obviously, in the client AUM, increased by EUR 1.3 billion during 1 quarter. So this meant that the solvency capital requirement came up and the corresponding increase, which you normally see in the own funds, was lower than that. So this will even out in the coming quarters altogether. But of course, the main impact was that the -- now the symmetrical adjustment factor is at the maximum at 10 percentage points because the markets have been so strong. So, that, of course, hit it instantly. But over time, this -- of course, we hope to see as good AUM growth because that's probably the most -- single most important driver for our profitability, but it's also kind of -- it will even out the impact altogether because then the own funds increase will compensate for that as well. But once you see a very high increase in the assets under management, it will kind of temporarily burden the solvency margin as well, even though it's in the capital-light business.

The next question comes from Jaakko Tyrvainen from SEB.

Jaakko from SEB. The Cliens questions have -- most have been discussed. But if I may, I would like to ask about the incentives for the key employees there. Is the 22% stake enough strong in your view for the key employees? And could you talk a bit more how you are planning to retain the key people in the business?

Yes. Thanks, Jaakko. We think that it's a very strong vote of confidence that the key employees and actually most of the employees at Cliens wanted to stay along for the ride that we have in front of us. And the incentive from their part is actually quite strong with the shareholding they have. So we absolutely believe that the kind of ownership they have is enough to align their interest with us and retain the key employees. That was one of our main concerns and main points during the discussions that we absolutely want to retain the key employees, and we think that we've found a structure that very much does so.

And then, on the Q1 report and performance, I know that you are talking about the net numbers in terms of flows. But could you elaborate, did you see material outflow during the quarter? Just trying to understand the underlying new business trends there.

Yes. Petri here. About the net flow and outflows and inflows, I would say that no one should be worried about our sales capability. Our sales is going extremely well, and our products are in order and there is no softening on that side. The fact, of course, is that we have now invested quite a lot of new salespeople lately, and we haven't seen or got yet, let's say, normal level of sales from them. At the same time, our assets under management has increased a lot, which means that even our customers are extremely happy with us. We have a very high NPS. Still, we have a normal industry average outflow yearly basis. Our customers need money back, a reason or another, even though they are happy with us. And that means that the bigger assets under management also creates bigger net outflow, no matter what in certain ways. So you have to sell even more than previously. So that's one. There is one a little bit bigger outflow number in customer side, which has nothing to do with the customers' happiness with that. It was customers' other reasoning and structuring. So I would say that it was a little bit more outflow side than sales inflow side, which affected that the number wasn't that high when it comes to net flow during the Q2.

Very good. Continuing on that one, you have reported quite nice amount of new product commitments during the first half. Should we think that the sales -- good sales and commitments is somehow away from the kind of sort of ordinary net flows? You will get that money later on, but is it kind of -- should we kind of think that the commitment sales has been done -- is kind of similar to the net flow sales?