CEO's review

Solid third quarter

Economic growth in the United States continued to be strong in the third quarter, as in the early part of the year, but remained subdued in Europe. In the US, there were signs of a slowdown in the rise of consumer prices and a cooling in the labor market during the summer, thereby prompting the Federal Reserve, the central bank of the United States, to cut interest rates by half a percentage point in September. The European Central Bank, which started interest rate cuts already in June, further lowered its key interest rate to 3.5 percent at its September meeting. Central banks both in the US and in Europe are expected to continue their interest rate cuts well into next year, possibly up to 2026.

In addition to the economic and interest rate outlook, the market monitored closely the developments in geopolitical risks. The focus was on the upcoming presidential election and its potential impacts on the country’s economic, trade, and foreign policies. Generally, the US turning inward and rising protectionism, as well as a possible trade war between the US and China, are perceived as threats.

In the third quarter, income from capital markets was positive in all main markets and in Finland. Returns on fixed income investments were strong across all interest rate asset classes, and equity returns were mostly reasonable or good, too. In the real estate market, the decline in prices appears to have levelled off as a result of the interest rate cuts, but a genuine recovery will require an improvement in vacancy rates and a pickup in transaction activity. There were no significant changes in the valuations of private equity investments during the quarter.

"Commission income from traditional funds as well as advisory fees increased significantly."

Evli Group’s net revenue in the third quarter decreased by six percent to EUR 24.5 million (EUR 25.9 million). Taking into account the corporate restructuring of the incentive business carried out in March, comparable revenue was slightly higher than in the previous year. Commission income from traditional funds as well as advisory fees performed best, both of which increased significantly. Fee income from private equity funds and asset management was at the previous year’s level. As a result of the slowdown in trading activity, brokerage income fell. Income from the company’s own balance sheet was at the previous year’s level.

The Group’s operating profit for the third quarter increased by three percent to EUR 10.5 million (EUR 10.2 million). Evli’s return on equity for the first nine months was 35.8 percent (22.8%). The ratio of recurring revenue to operating expenses was 136 percent (133%). The Group’s solvency and liquidity were at an excellent level.

"Managed client assets increased to EUR 18.7 billion."

The Wealth Management and Investor Clients segment’s net revenue increased by 6 percent in the third quarter and was EUR 22.4 million (EUR 21.2 million). As a result of positive market development and net subscriptions, managed client assets increased to EUR 18.7 billion (EUR 17.1 billion). Evli Fund Management Company’s mutual fund capital, including alternative investment products, was approximately EUR 13.4 billion (EUR 12.0 billion). Net subscriptions of traditional investment funds amounted to approximately EUR -20 million during the third quarter. The largest net subscriptions were targeted to Evli European High Yield fund, which invests in lower-rated corporate bonds, and to Evli GEM fund, which invests in emerging markets equities.

The Advisory and Corporate Clients segment’s net revenue decreased by 63 percent in the third quarter to EUR 0.9 million (EUR 2.5 million). The decrease in net revenue is a consequence of the corporate arrangement in which the incentive business became an associated company of the Group and is therefore no longer part of segment reporting. Advisory fees received from M&A activities increased compared to the corresponding period of the previous year. The unit’s mandate base is good, and there are clear signs of pickup in the M&A market from the previous year’s exceptionally low level.

The key areas of Evli’s strategy, international sales and alternative investment products, developed positively during the quarter. Net subscriptions by international clients amounted to EUR 100 million and international clients accounted for 19 percent (19 %) of Evli’s total fund capital, including alternative investment products. Sales of alternative investment products totaled EUR 22 million (EUR 19 million) during the quarter.

In the area of responsibility, Evli continued engaging with the investee companies, both independently and together with other investors. During the third quarter of the year, Evli continued as an active investor participant in the Nature Action 100 initiative, which engages with 100 companies that are systemically important regarding nature and biodiversity loss and encourages companies to take more ambitious action to reduce nature loss. Furthermore, Evli signed the 2024 Global Investor Statement to Governments on the Climate Crisis, that aims to accelerate the private capital flows needed for a transition to a climate-resilient, nature-positive economy. During the third quarter, Evli also presented its child rights research in an event hosted by UNICEF Sweden.

Maunu Lehtimäki, CEO, Evli Plc

Updated in connection with the publication of Evli Plc's Interim Report 1–9/2024 on October 25, 2024.