Multitude's Q1 earnings missed our estimates, though the company reiterated its full-year guidance. Clear drivers for profit improvement exist for the rest of the year, but we see limited margin of safety in the guidance. Sortter adds further support to the earnings outlook and strengthens the growth story. With valuation remaining very low, we reiterate our Buy recommendation and EUR 7.8 target price.

Softer-than-expected start of the year

Multitude’s topline development was in line with our expectations with total net operating income reaching 51.2 MEUR (-8 % y/y), when including Income from associates. Net interest income declined by 17% in total. The drop was most dramatic in Consumer Banking, where last year’s divestments and interest rate caps weighted on the topline. Overall, the decline in net interest income was offset by growth in net fee income (+141%) and Income from associates (+108%). Earnings before taxes came in at 5.1 MEUR, which was below our estimate of 5.9 MEUR. The miss was caused by clearly higher-than-expected cost structure, as the impairment losses were actually below our expectations. From the business unit, SME Banking, was especially weak as the losses (EBT -1.7 MEUR) were larger than in the comparison period. As the interest on perpetual bonds also increased, the EPS declined in total to EUR 0.13 per share (Q1’25: EUR 0.28), clearly below our expectations (EUR 0.28 per share).

Guidance requires clear improvements going forward

Multitude reiterated its 2026 guidance, which expects a 30 MEUR net profit. After a soft Q1 (net profit 4.4 MEUR), the earnings performance needs to improve drastically in coming quarters. The company commented that they are progressing according to their own plans, still being confident with the outlook. Key variable in reaching the guidance is accelerating growth, which would allow the grown cost base to scale. The earnings in coming quarters will also be supported by earn-outs from the divestment made last year. Sortter will also now be consolidated to Group figures, and we believe this will also give a boost to earnings development. Sortter reached profitability already last year (net profit 1.2 MEUR) and to our understanding the outlook has continued to be good. The company will continue to operate independently and it won’t be integrated into Multitude. With the deal, Multitude continues to diversify its revenue streams as fee income should grow meaningfully in 2026-2027. We flag that some uncertainty remains around Multitude's exact ownership percentage, deal valuation, and future reporting structure. Thus, our estimates regarding Sortter will be specified as we get more information. Overall, we view the guidance would have been difficult to reach organically. We now expect Multitude’s net operating income to grow this year 4 % 224 MEUR and net income to improve to 29.0 MEUR. guidance did not either). This would represent a slight miss on guidance, though we believe it would not be large enough to trigger a revision – as was the case when guidance was marginally exceeded in 2025.

Valuation remains very low

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 also supports acceptable valuation levels (through higher ROE-%). This narrative is further highlighted with the acquisition of Sortter. In our view, a ratio of 0.85-1.15x 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 our acceptable range. The P/E ratio based on this year's estimates is 6x. Multitude's risk profile is high compared to other, more traditional banks, but the company has managed to diversify its income streams meaningfully lately. We note that the Lea Bank ownership alone constitutes 29% of Multitude’s market cap (not fully visible in balance sheet equity). Overall, we consider the risk/reward ratio to be very attractive given the current valuation.