New Initiatives Like Fineco X Will Expand Brokerage Services In 2025

Key Takeaways

• FinecoBank's emphasis on client expansion and marketing is set to boost AUM and revenue through increased transaction volumes and fee income.
  
• A strategic focus on transparency and innovative offerings is expected to enhance net margins and attract younger clients and high-net-worth individuals.
  
• Regulatory challenges and cost pressures threaten FinecoBank's revenue growth and net margins, with potential volatility in deposits adding financial and operational risks.

Catalysts

Provides banking and investment products and services.

• FinecoBank's focus on expanding its client base and enhancing its marketing efforts, particularly through aggressive advertising campaigns, is expected to drive higher client acquisition and asset under management (AUM) growth in 2025. This should positively impact revenue growth by increasing overall transaction volumes and fee income.
  
• The bank's strategic shift towards transparency, innovation, and quality in its offerings aligns with the evolving preferences of clients, especially among younger generations and high-net-worth individuals. This positioning is expected to enhance net margins, as clients potentially shift towards higher-margin services and advisory offerings.
  
• FinecoBank's expanding brokerage business is capitalizing on increased client activity and interest in the financial markets. The launch of new initiatives such as Fineco X and a brokerage-only account is likely to sustain revenue growth in this segment as the client base and trading volumes increase.
  
• Anticipated growth in investing revenues, driven by Fineco Asset Management's control over the investment value chain and the demand for advanced advisory services, is projected to result in a low double-digit increase in revenue for 2025, enhancing earnings potential.
  
• The capital-light business model and strong capital ratios position FinecoBank to potentially increase its payout ratio to 70-80%, which, alongside strong operating leverage, could improve earnings per share as excess capital generation finds its way back to shareholders.

FinecoBank Banca Fineco Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming FinecoBank Banca Fineco's revenue will grow by 2.7% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 49.6% today to 49.2% in 3 years time.
• Analysts expect earnings to reach €702.6 million (and earnings per share of €1.13) by about March 2028, up from €652.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.9x on those 2028 earnings, up from 17.5x today. This future PE is greater than the current PE for the GB Banks industry at 8.5x.
• Analysts expect the number of shares outstanding to grow by 0.06% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.46%, as per the Simply Wall St company report.

FinecoBank Banca Fineco Future Earnings Per Share Growth

Risks

• The anticipated new regulation on instant payments is expected to lead to a slight decrease in banking fees for 2025, which could negatively affect net margins and revenue.
  
• FinecoBank's operating costs are expected to grow by around 6% year-on-year in 2025, not including additional costs for growth initiatives, which may constrain net earnings if revenue growth does not outpace these costs.
  
• The dependence on the evolving interest rate environment makes predicting net interest income challenging; unexpected interest rate changes could negatively impact earnings.
  
• There is a risk associated with the volatility of deposits due to active trading behavior by Fineco's clients, which can cause temporary impacts on financial income and revenue stability.
  
• FinecoBank's international expansion plans depend on regulatory approvals, which could pose execution risks, impacting revenue growth and operational costs if delayed or denied.

Valuation

• The analysts have a consensus price target of €18.818 for FinecoBank Banca Fineco based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €21.0, and the most bearish reporting a price target of just €14.8.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €1.4 billion, earnings will come to €702.6 million, and it would be trading on a PE ratio of 20.9x, assuming you use a discount rate of 8.5%.
• Given the current share price of €18.66, the analyst price target of €18.82 is 0.8% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.