Multitude’s Q2 came in clearly above our expectations, although partly due to positive one-off items. However, Q2 brought back our confidence in the Company’s ability to reach its guidance this year after a soft Q1. Clear support for this and earnings growth in the coming years is coming from Sortter, which the company managed to acquire at a very attractive valuation. Valuation remains very low, and we reiterate our Buy recommendation and after small positive estimate revisions lift our target price to EUR 8.0 (was EUR 7.8).

Q2 earnings clearly above our expectations

Multitude's Q2 net operating income grew to 56.6 MEUR (Q2'25: 55 MEUR), slightly above our 54 MEUR estimate, with the beat coming from higher-than-expected other income (2.5 MEUR) related to last year's divestments and revaluation item regarding Sortter. Especially positive was the nearly tripling of net fee income to 7.0 MEUR thanks to the Sortter consolidation and good organic development. Earnings before taxes (EBT) rose to 10.0 MEUR (Q2'25: 8.0 MEUR), clearly above our 7.7 MEUR estimate. It’s good to note that this was partly driven by higher-than-expected one-off items (we had some in our estimates). However, adjusting for these, the operational development was also somewhat better than we expected thanks to lower-than-expected impairment losses (16.9 MEUR vs. Q2’25: 20.3 MEUR) that continued their long-lasting very good trend. The main negative was SME Banking, whose loss widened (Q2-EBT: -1.8 MEUR). The company carried out some restructuring in SME Banking in Q2, and the performance should start improving already during the coming quarters.

Guidance looks achievable, small positive estimate revisions

Multitude reiterated its guidance of 30 MEUR net profit for 2026. With 13.1 MEUR accumulated in H1, the strong Q2 eased our earlier concerns, although the target still requires a solid H2. The end of year is supported by the full consolidation of Sortter and the remaining earn-outs, whose timing and size add some uncertainty. We made only small estimate revisions, as part of the beat was one-off in nature. We lifted our Sortter-driven fee income forecasts and cut our impairment loss estimates, partly offset by higher costs, lifting our EBT estimates for the coming years by 2-4%. We now expect net operating income to grow by some 5% to 226 MEUR and net profit to reach 30.1 MEUR in 2026.

Sortter was acquired at a very attractive valuation

Multitude also disclosed the terms of the Sortter deal. The remaining 80% stake was bought for 7.0 MEUR in cash. Compared to Sortter's run-rate revenue level of 25 MEUR and profit level of 4.5-5.0 MEUR, we find the deal very attractive and value-creating. The low price reflects the option agreed already in 2023, and we believe the business has developed clearly better than both parties expected. The acquisition gives a meaningful boost to Multitude’s asset-light fee income, diversifying the company’s revenue streams further.

Valuation remains very low

In our valuation, we approach 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 by the Sortter acquisition. 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 5.5x. Multitude's risk profile is still higher 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 26% 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.