Acquisitions Will Solidify Firm's Future Position In Wealth Management

Key Takeaways

• Strong AUM growth and strategic acquisitions support scalable growth, enhancing net margins through synergies and operational efficiencies.
  
• Ambition to be a leading wealth manager in Western Europe drives earnings growth by expanding service offerings and client reach.
  
• Normalization of interest income, shifts in savings, acquisitions, and macroeconomic factors present risks to future earnings growth and profitability.

Catalysts

Provides various financial services in the Netherlands and internationally.

• Van Lanschot Kempen's strong growth in assets under management (AUM) and commission income, combined with momentum across client segments such as Private Banking in the Netherlands and Belgium, indicate potential future revenue growth as they continue to capture market share and attract new clients.
  
• The integration of Robeco Retail into Evi and the acquisition of Accuro support scalable growth, which can lead to improved net margins as the company leverages synergies and operational efficiencies in managing larger asset bases with controlled expense increases.
  
• The firm's ambition to be a leading wealth manager in Western Europe by further capitalizing on private banking growth and unlocking additional growth engines positions them well for future earnings growth as they expand their service offerings and client reach.
  
• Van Lanschot Kempen's efforts to improve profitability in investment management and investment banking segments, which are now showing positive results, indicate potential for earnings growth as these segments return to profitability and contribute to the overall financial performance.
  
• The company's strong capital position and commitment to return excess capital to shareholders suggest potential for increased shareholder value through dividends and share buybacks, positively impacting earnings per share (EPS) in the future.

Van Lanschot Kempen Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Van Lanschot Kempen's revenue will grow by 4.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 19.6% today to 20.0% in 3 years time.
• Analysts expect earnings to reach €160.5 million (and earnings per share of €3.76) by about February 2028, up from €138.9 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as €144.3 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.7x on those 2028 earnings, up from 14.3x today. This future PE is greater than the current PE for the NL Capital Markets industry at 14.4x.
• Analysts expect the number of shares outstanding to decline by 0.18% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.93%, as per the Simply Wall St company report.

Van Lanschot Kempen Future Earnings Per Share Growth

Risks

• The normalization of interest income after a strong 2023 could pose a risk to future earnings growth if interest rates continue to decline or if the competition for deposits intensifies, impacting net interest income.
  
• A shift from savings to investments was observed, but factors like tax regulation changes could reverse this trend, affecting future net inflows and subsequently impacting assets under management growth and revenue potential.
  
• The acquisition of Robeco Retail and Accuro, while potentially positive, could lead to increased integration costs and challenges, impacting net margins if the expected synergies are not realized promptly.
  
• The stable margin in the Private Clients Netherlands segment, driven partly by lower-margin Robeco Retail accounts, may continue to face pressure if advisory assets grow faster than discretionary ones, affecting overall profitability.
  
• Macroeconomic factors, such as potential ECB rate cuts, could influence future net interest income if the bank is unable to manage deposit pricing effectively, impacting overall earnings.

Valuation

• The analysts have a consensus price target of €47.75 for Van Lanschot Kempen based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €803.5 million, earnings will come to €160.5 million, and it would be trading on a PE ratio of 15.7x, assuming you use a discount rate of 7.9%.
  
• Given the current share price of €47.15, the analyst price target of €47.75 is 1.3% 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.