Europe's Wealth Transfer Will Fuel Digital And ESG Expansion

Key Takeaways

• Strong positioning in private banking and digital capabilities, alongside effective acquisitions, could drive recurring revenue, margin expansion, and sustainable earnings growth ahead of peers.
  
• Leadership in sustainable investing and robust capital strength unlocks new advisory revenue streams, supports strategic acquisitions, and enables long-term profitability improvements.
  
• Digital disruption, high operational costs, fee pressure, shifting demographics, and falling interest rates threaten profitability and challenge the sustainability of Van Lanschot Kempen's traditional business model.

Catalysts

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

• While analyst consensus recognizes scalable private banking growth from investments in talent and technology, current inflow trends suggest the firm is positioned to exceed expectations as it captures a disproportionately high share of Europe's accelerating intergenerational wealth transfer, which could structurally lift both net new assets and recurring fee revenues beyond current forecasts.
  
• Analysts broadly agree that integration of recent acquisitions will drive tangible increases in AUM and commission income; however, the integration track record and the now fully modernized Evi-Robeco platform could serve as a launchpad for transformative digital client acquisition across the mass affluent segment, substantially boosting client volumes, product cross-sell, and operating leverage, with possible step-change impacts on revenue and margin expansion.
  
• Rising institutional and HNW demand for sustainable and alternative investments, coupled with Van Lanschot Kempen's leadership in ESG and private market solutions, positions the firm to tap into robust, long-term fee growth from higher-margin products which could outpace traditional asset management peers, driving sustainable earnings growth.
  
• The firm's deepening cross-segment synergies, evident in innovative transaction structures linking investment banking, private banking, and asset management, may unlock new recurring advisory and commission revenue streams, enabling outsized profitability improvements relative to rivals.
  
• Stringent regulatory barriers and the company's fortress balance sheet-underscored by a CET1 ratio materially above internal targets-enable accelerated capital returns and selective, high-value acquisitions in a consolidating market, leading to both earnings accretion and upside optionality.

Van Lanschot Kempen Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Van Lanschot Kempen compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Van Lanschot Kempen's revenue will grow by 5.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 17.2% today to 21.7% in 3 years time.
• The bullish analysts expect earnings to reach €185.3 million (and earnings per share of €4.38) 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 bullish analyst cohort, the company would need to trade at a PE ratio of 16.6x on those 2028 earnings, which is the same as it is today today. This future PE is greater than the current PE for the NL Capital Markets industry at 16.1x.
• 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 8.71%, as per the Simply Wall St company report.

Van Lanschot Kempen Future Earnings Per Share Growth

Risks

• The increasing shift towards digital disintermediation, with more clients utilizing fintech platforms and robo-advisors, poses a risk of fee compression and client attrition, potentially reducing long-term revenue and net margins as Van Lanschot Kempen's traditional model is challenged.
  
• The company faces elevated cost pressure due to ongoing investments in staff, technology, and branch expansion, as well as salary indexation and inflation, resulting in a high cost/income ratio of 71.8 percent that currently exceeds the 2027 target range, threatening future earnings growth unless materially reduced.
  
• Demographic trends such as an aging client base in Europe could lead to net asset outflows as retirees draw down portfolios, while younger prospective clients may prefer more cost-effective, digitally native competitors, impacting future asset under management and commission income.
  
• Persistent industry-wide fee compression, as evidenced by outflows in high-margin investment strategies and the discontinuation of subscale funds, could erode total commission income and place further pressure on net profitability, especially if new inflows are directed to lower-margin product lines.
  
• Cyclical low and declining interest rates in Europe, highlighted by reduced net interest income and margin following ECB rate cuts, continue to squeeze profitability, making net interest income sensitive to macroeconomic conditions that are outside the company's control.

Valuation

• The assumed bullish price target for Van Lanschot Kempen is €57.0, which is the highest 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 bullish 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 bullish analysts, you'd need to believe that by 2028, revenues will be €855.9 million, earnings will come to €185.3 million, and it would be trading on a PE ratio of 16.6x, assuming you use a discount rate of 8.7%.
  
• Given the current share price of €49.6, the bullish analyst price target of €57.0 is 13.0% higher.
  
• 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.