Multitude Q4'24 preview: A solid finish for the year expected

Multitude hasn’t given any preliminary announcements of its Q4 numbers, and thus the company will most likely reach its guidance range. As our estimate was slightly below the range, we made small positive estimate revisions before the earnings. Overall, Multitude seems to have finished the year with a good momentum and the guidance for 2025 indicates continued earnings growth. In our view, the risk/reward ratio is tilted to the positive side with the current valuation. We reiterate our Accumulate recommendation and our target price of EUR 5.7.

Small estimate changes before the earnings announcement

Multitude will report its Q4’24 results on Thursday morning, April 3. The company seems to be reaching its EBIT guidance set for 2024 (approximately 67.5 MEUR). Thus, the end of last year has been rather strong for Multitude. Our previous forecast was slightly below the guidance, which resulted in us making minor positive estimate revisions before the earnings announcement. Additionally, we have revised our estimates regarding the Lea Bank minority investment and added the Tier 2 –instruments in our estimates.

Multitude Q4’24 preview: Strong earnings growth expected

We expect Multitude’s net operating income to have grown approximately 8% to 57.6 MEUR (Q4’23: 53.4 MEUR). In terms of net interest income, we expect the growth rate to be more modest in the largest business unit Consumer Banking, and clearly faster in the earlier stage business units, SME Banking and Wholesale Banking. We believe demand for new loans has generally been at a healthy level in Q4. In our estimates growth is also supported by fee income growth (previously a very small income stream), which is the result of the new embedded finance partner in Poland.

We expect Multitude’s earnings before taxes to reach 7.2 MEUR, which would be a significant increase from the comparison period (Q4’23: 3.4 MEUR). The main driver behind the earnings growth is growth in net operating income, while we don’t expect growth in costs resulting in an increased cost/income ratio. We also expect the impairment losses to be approximately on the comparison period level, which would be a good accomplishment considering the estimated growth of the loan portfolio. Generally, the trend in impairment losses was very good in 2024 after a weaker Q1 and we expect the good trend to continue. For the whole year, we expect the EBIT to land at 67.3 MEUR, which would be in line with the estimated range of 66.5-68.5 MEUR that the company gave in connection with the Q3’24 results. We expect Multitude’s Board to propose a 0.22 EUR dividend per share, which would be at the lower end of the dividend policy (25% of the estimated net profit). Multitude has already given a guidance the for 2025, where it expects a net profit level of 23 MEUR (our estimate is currently at 23.4 MEUR). Thus, there shouldn’t be major surprises regarding the outlook.

Risk/reward ratio remains attractive

In our view, the acceptable P/B for Multitude is currently in the range of 0.7-1.0x, derived from assumptions about sustainable return on equity and cost of equity. We have raised our cost of equity slightly concerning the higher-than-expected cost of Tier 2 financing, but on the other hand we also raised our earnings and ROE-% estimates.  Treating the perpetual bonds on the balance sheet as debt, Multitude's current P/B is 0.7x, which is at the lower end of the range, suggesting a modest valuation. Our dividend discount model also suggests upside potential. Compared to its peer group, the valuation is relatively neutral, but the peer group itself trades at relatively low multiples. In return for the rather high risk profile, the expected return is good at the current valuation and we see the risk/reward ratio tilted to the positive side as the business momentum seems to be good as well.