Multitude Q3'25: High profit growth ambitions

Multitude’s Q3 numbers slightly missed our estimates, but on a positive note, asset-light fee income kept growing fast and impairment losses kept decreasing. While ambition level was high in the CMD, we found the presentations to be informative and encouraging regarding the company’s mid-term outlook. Despite this, estimate changes were negative based on the Q3-numbers and net interest income development. We cut our target price to EUR 7.8 (was EUR 8.0) and reiterate our Accumulate recommendation.

Growth headwinds, but solid profit development

Multitude’s growth in Q3 was slower than we had expected due to sharp decline in net interest income especially in Consumer Banking, which was caused by lower interest rates (interest expenses did not decline) and some divested entities. The loan book itself still kept growing. Despite growth headwinds, earnings before taxes increased to 7.0 MEUR (Q3’24: 6.2 MEUR) driven by growth in fee income and income from associates (Lea Bank) as well as decreased impairment losses. In addition to these, the earnings saw a 2.0 MEUR boost of a one-time divestment-related income item, which reduced the “quality” of the earnings.

Next year’s guidance seems challenging with current trend

Multitude reiterate its 2025 guidance, which expects the net profit to be 24-26 MEUR. Our previous estimate was above the guidance range, but after the Q3 report we see landing within the range to be more likely (estimate 25.0 MEUR). The company also reiterated its 2026 guidance (30 MEUR net profit), which we find challenging given the negative net interest income and earnings trend in the largest business unit (Consumer Banking).

Capital Markets Day focused on profit growth drivers

Multitude shared the details of its strategy for 2026-2028 in its CMD. The company still seeks profitable growth by serving the overlooked customers. The company continues to pursue growth via organic growth, partnerships and M&A. The day focused largely on the drivers for the targeted profit growth. Multitude aims to increase net profit by 20% p.a. (after 30 MEUR in 2026). The company also aims to reach a cost/income ratio of 40 % in 2028 and a Return on Tangible Equity of +20%, which are also very ambitious targets. The company sees the profit improvements coming from income growth (recurring asset-light fee income plays a significant role), cost efficiency (automation with AI, simplifying organizational structure, funding cost reduction with lower dependance on 3rd party deposits) and asset quality improvements (enhancing scoring / underwriting systems and focusing on lower-risk customers). Many of these drivers already have a good momentum (fee income growth, asset quality, deposit composition), but some require more focus in our view (volume growth and cost efficiency). Overall, we find the drivers for profit growth to be valid, but naturally there’s uncertainty about the slope of improvements going forward. Our current estimates do not expect the company to reach its targets. However, we note that from 2021 onwards, the company has had a great track record in delivering its targets.

We stay onboard

We still look at Multitude’s valuation from a bank’s perspective, although the growth in fee income could create more asset-light income streams for the company in the future, also supporting valuation (through higher ROE-%). In our view, an acceptable ratio for Multitude is currently 0.90-1.20x, derived from assumptions about sustainable return on equity and cost of equity. Treating the perpetual bonds on the balance sheet as debt, Multitude's current P/B is slightly above 0.9x, which is at the lower end of the range, suggesting a modest valuation. Although the Q3 performance was slightly weaker than expected, the CMD reaffirmed that the value creation potential is good with growth in more asset-light and higher ROE-% businesses. Overall, with the current valuation, we consider the risk/reward ratio attractive.