Multitude Q4'25: Reshaping income streams yield profits

Multitude’s Q4 profit exceeded our expectations, as well as the company’s own guidance. We see reaching the guidance for 2026 as possible due to growth in high-margin fee income, the continued positive development of impairment losses, and cost discipline. Given the positive profit trend and the slight decline in the stock price, we consider the valuation to be very low (2026E P/B 0.7x and P/E below 6x). We reiterate our target price of EUR 7.80 and raise our recommendation to Buy (was Accumulate).

Guidance exceeded

Multitude’s topline development was in line with our expectations with total net operating income reaching 51.9 MEUR (-10 %). Under the hood, net interest income came down slightly more than we expected (-22 %, 44.2 MEUR), but fee income continued its very high growth (+155 %, 5.2 MEUR). This is a high-margin asset-light revenue stream, and we find the continued revenue diversification to be positive. We note that the transition is something that company is itself aiming at (divested entities), which makes the decline in net interest income less dramatic. Net profit reached 6.5 MEUR exceeding our expectations clearly and the company actually managed to exceed its full-year guidance range (26.6 MEUR, guidance was 24-26 MEUR). The normally volatile impairment losses were in line with our expectations (20.1 MEUR), but operating costs were lower than we expected (24.2 MEUR), explaining the earnings beat.

No dividend proposal yet, new capital from perpetual notes gives room for growth investments

The company didn’t communicate a dividend proposal yet, but we expect to hear one before the AGM in April. Given that the company is just about to raise more capital from it’s 70 MEUR perpetual notes (will be used mostly to refinance current 45 MEUR perpetual notes before step-up in the interest rate), we believe the company will be paying a dividend on the lower end of the policy range (25-50% of net profit). We also see it very possible that the company will be pursuing some M&A opportunities this year as this is a key part of the company’s growth strategy.

We now see the guidance to be reachable

The guidance for 2026 was already known, and the company expects to reach a net profit of 30 MEUR. Before Q4, we considered the guidance rather optimistic, given the negative topline development. However, given the continued strong profitability, we now consider the guidance realistic. The main drivers are continued growth in high margin fee income (partly recurring and partly transaction-based), continued good development of impairment losses and cost discipline. We now believe the total net operating income in 2026 to be flat at 214 MEUR, where we estimate the net interest income decline to continue driven by Consumer Banking while the fee income continues strong growth (both from partner business in Consumer Banking and payment business in Wholesale Banking). We now estimate the company to be able to reach its guidance (net profit estimate 30.1 MEUR).

Risk/reward ratio is very attractive with current valuation

In our valuation, we look at Multitude as a bank, although fee income growth is creating more asset-light income streams for the company, which can also support acceptable valuation levels if the growth continues (through higher ROE-%). In our view, a ratio of 0.90-1.20x is currently acceptable for Multitude, derived from assumptions about sustainable return on equity and cost of equity. When we treat the perpetual bonds on the balance sheet as debt, Multitude’s 2026 estimated P/B is above 0.7x, which is clearly below the acceptable range. The P/E ratio based on this year's estimates is 5.7x. Given the current positive profitability trend, we consider the valuation to be very low. Multitude's risk profile is high compared to other banks, but we also see its return potential as high. We note that the Lea Bank ownership alone constitutes 28% of Multitude’s market cap. Overall, we consider the risk/reward ratio to be very attractive given the current valuation.