Digital Competition And European Regulations Will Hinder Performance

Key Takeaways

• Digital disruption and evolving client preferences threaten revenue growth, while scale and legacy systems limit competitiveness against fintech and global players.
  
• Regulatory pressures and shifting demand toward low-cost solutions increase compliance and operational costs, compressing margins and risk long-term earnings stagnation.
  
• Strong client growth, disciplined risk management, and strategic investments in technology and acquisitions underpin expanding profitability, revenue diversification, and operational scalability in core wealth management activities.

Catalysts

Provides various financial services in the Netherlands, Belgium, and internationally.

• The accelerating adoption of digital finance and the rise of agile fintech competitors threaten to erode Van Lanschot Kempen's client base, particularly as younger and more digitally native high-net-worth individuals inherit wealth, making traditional relationship-driven approaches less appealing and likely suppressing long-term asset inflows and revenue growth.
  
• Intensifying regulatory requirements across Europe, including stricter anti-money laundering, transparency, and ESG mandates, are expected to drive up compliance and operating costs, putting sustained pressure on the company's net margins for years to come.
  
• The shift in wealth management demand toward passive and low-cost investment solutions is reducing client appetite for the higher-margin bespoke services that Van Lanschot Kempen relies upon, pointing to continued fee compression and negative impact on commission income and earnings.
  
• Van Lanschot Kempen's specialist focus and limited geographic scale may hinder its capacity to compete effectively with global financial institutions and digital-only entrants as industry consolidation accelerates, ultimately risking stagnation or decline in market share and topline revenue.
  
• Ongoing reliance on legacy IT infrastructure, despite recent digital investments, leaves the company exposed to higher operating costs and the threat of operational obsolescence, undermining its ability to deliver scalable earnings growth and maintain an efficient cost/income ratio over the long term.

Van Lanschot Kempen Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Van Lanschot Kempen compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Van Lanschot Kempen's revenue will grow by 4.1% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 17.2% today to 18.6% in 3 years time.
• The bearish analysts expect earnings to reach €154.5 million (and earnings per share of €3.62) by about September 2028, up from €126.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 15.5x on those 2028 earnings, down from 16.6x today. This future PE is greater than the current PE for the NL Capital Markets industry at 15.4x.
• Analysts expect the number of shares outstanding to grow by 0.08% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.69%, as per the Simply Wall St company report.

Van Lanschot Kempen Future Earnings Per Share Growth

Risks

• Sustained strong organic and inorganic growth in assets under management, highlighted by consistent net inflows across all segments and key bolt-on acquisitions, suggests the company's revenue base may continue expanding over the long term, supporting higher commission income and overall earnings.
  
• The rapid growth in wealth management and private banking clients in core markets, and successful integration of digital platforms like Robeco's with Evi, provide scalability and operational leverage, which can enable operating margin improvement and potentially boost net profit.
  
• Maintaining very high-quality loan portfolios, as indicated by the low and declining impaired loan ratios and continued loan growth, reduces credit risk and supports stable net interest income and lower provision expenses, which together work to protect and potentially grow overall profitability.
  
• Adaptation to macroeconomic shifts, including management of interest rate exposure and hedging strategies, combined with guidance for higher net interest income in future periods, positions the company to withstand challenging rate environments, helping defend and grow net interest margins.
  
• Proactive cost discipline and ongoing investments in staff, technology, and scalable growth, alongside successful cross-selling initiatives in alternative investments and family office expansion, support long-term operating efficiency, revenue diversification, and sustained earnings growth.

Valuation

• The assumed bearish price target for Van Lanschot Kempen is €44.5, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Van Lanschot Kempen's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €57.0, and the most bearish reporting a price target of just €44.5.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be €830.6 million, earnings will come to €154.5 million, and it would be trading on a PE ratio of 15.5x, assuming you use a discount rate of 8.7%.
  
• Given the current share price of €49.65, the bearish analyst price target of €44.5 is 11.6% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• 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.