Multitude’s Q3 earnings exceeded our expectations, driven by lower-than-expected impairment losses. We see the 2026 guidance as comfortably within reach, and we also see solid earnings drivers for next year, although this year has been supported by some positive one-off items. We raise our operating estimates slightly, but our EPS estimates fall due to the interest on the new AT1 instrument. Overall, the business is performing well, which is not yet reflected in the valuation. We reiterate our Buy recommendation and EUR 8.0 target price.

Q3 earnings above our expectations

Multitude's Q3 net operating income rose to 59.7 MEUR (Q3'25: 52.3 MEUR) and was in line with our expectations. Net interest income was pretty much flat on a year-on-year basis (still negative y/y effect in Consumer Banking, but growth in q/q), but net fee income tripled to 10.6 MEUR thanks to Sortter's first full quarter in the Group. Earnings before taxes rose to 10.8 MEUR (Q3'25: 7.0 MEUR), clearly above our 9.6 MEUR estimate. The beat came from impairment losses (16.2 MEUR, -15% y/y), which more than offset slightly higher-than-expected operating expenses. EPS landed at EUR 0.34 (Q3'25: EUR 0.25) vs. our EUR 0.29 estimate.

Multitude reiterated its guidance of 30 MEUR net profit for 2026, as well as its target of 20% annual net profit growth in 2027-2028. After a strong Q3, we see no major challenges in the 2026 guidance, and we estimate the net profit to land at 30.6 MEUR.

Operative estimates up, but new AT1 weighs on EPS

We slightly raised our top-line estimates, as we believe the new AT1 instrument will enable further loan book growth. Our EBT estimates for 2026-2028 rose by 2-6%. Our EPS estimates, however, decreased by 9-14% for 2027-2028 as we included the new 50 MEUR AT1 instrument. Its coupon (9% + 3-month Euribor, close to 6 MEUR per year at current rates) is recognized below net profit and only affects EPS. In the short term, the roughly 6 MEUR net profit improvement implied by the 2027 target could therefore go almost entirely to AT1 holders. If Multitude, however, manages to grow its loan book (Multitude estimated the AT1 gives room for 300-350 MEUR more loans) with good risk profile, the return on this capital could very well still be attractive in our view in the medium term.

For 2027, we see good profit drivers: Consumer Banking's net interest income returning to modest growth (q/q already growing), Sortter's full-year consolidation, SME Banking’s modest turnaround (trend has already improved) and Wholesale Banking's continued profitable growth. However, it’s good to note that, Sortter stake and earn-out revaluations have supported 2026 earnings by around 6-7 MEUR, which makes next year's comparison period harder. We expect 2027 net profit of 36.9 MEUR (+21%), in line with the company's growth target, but the EPS that better reflects earnings attributable to shareholders, grows only 9 % in our estimates.

Valuation remains very low even though the business is developing well

We value Multitude as a bank, although its growing asset-light fee income, further highlighted by Sortter, supports the acceptable valuation level. In our view, an acceptable P/B ratio for Multitude is still 0.85-1.15x. Treating the perpetual bonds as debt, Multitude's 2026e P/B is 0.75x, clearly below the range, while the adjusted P/E ratios for 2026-2027 are only 5.8x and 5.3x, respectively. The expected dividend yield is also high (2026e: ~10%). Multitude's risk profile is higher than that of traditional banks, but with the current valuation and the continued good trend of the business we see the risk/reward ratio as very attractive.