Multitude AG (0R4W) Earnings Call Transcript & Summary

Good morning and welcome to the Multitude's 2024 H1 results earnings call. Today, we will hear presentation regarding 2024 H1 results by CEO, Jorma Jokela; and CFO, Bernd Egger. We also have Chief Strategy and IR Officer, Lasse Makela available on the call. [Operator Instructions] I would now like to hand over to Multitude's CEO, Jorma Jokela. Please go ahead, Jorma.

Thanks, Sarah, and hello, everyone. So my name is Jorma Jokela, CEO and the Founder of the Multitude. Today, I will take you through Multitude's preliminary results for the first half of 2024, along with my colleague, our CFO, Mr. Bernd Egger. Good. And today, our call is to leave all of you with the four key takeaways. First one, we achieved incredible 17% growth in revenue. Second, all our three business units are delivering at least double-digit revenue growth. Third, we delivered amazing 34.5% growth in earnings before interest and tax. And the fourth one, we confirm our EBIT guidance of EUR 67.5 million for this year. Before we jump to go through the deeper numbers, a few words about the Multitude as a general. We hold an impressive 19-year track record of establishing a successful and profitable global fintech, focused on helping customers who are overlooked by traditional bank with amazing and fully digital customer experience. Originating from Scandinavia in Finland with a full EU-wide banking license and listing on the Frankfurt Stock Exchange in the prime standard. Today, our operation is across the three different business units, collectively serving more than 400,000 customers, 16 countries with over 700 colleagues. And last year, we delivered EUR 230 million of revenue and EUR 16.4 million of net profit. Multitude people inspiration comes from our vision to change the world, to build the most valuable financial platform, give amazing experience for customers who are often overlooked by other banks. We want to democratize financial service through digitalization, making them fast, easy and green, and this is where all our product logic is based as well. Our fintech growth platform is built around the idea that Multitude serve as a core platform supporting all scalable company, different business units benefit from this and can focus on improving the customer experience. And currently, we have got three business units on the platform, Ferratum specialized in digital consumer banking, CapitalBox focusing on digital SME banking and our newest business unit targeting wholesale banking customers under the Multitude bank brand. SweepBank was integrated into the Ferratum and CapitalBox as a part of the product end of the last year. On the management platform, our focus is twofold, enhancing scalability and constantly seeking new opportunities, like we do in [indiscernible]. We are a unique fintech company guided by ESG principles and have been contributing to growth and profit since the beginning. We are confident in our business model, which has allowed us to meet our EBIT target since 2021. And at the end of the last year, we decided to go further and start building and [indiscernible] the net profit, not just the EBIT. We have communicated our target for the dividend payout ratio. And lastly, we communicated last year our dream to build a EUR 1 billion valued company in 5 years' time. So we still have 4.5-year left. Good. All right. Let me talk about how Multitude is doing in the first half of 2024. We have had amazing start this year with revenue growth over 17% and EBIT over 34%. All three business units delivered at least a double-digit revenue growth. And this happened even higher credit loss in some part of our business. We can see that both EBIT and revenue have grown for multiple quarters in a row. For me as a person, this is showing that our strategy and growth initiatives are working really well and big thanks should go to all our people, a really big thanks. The current market is strongly supporting our business initiatives. Credit demand and payment behavior stays solid. New customer segments are entering on the market, and our target addressable market is expanding, as many banks struggle to serve their customers. We have been actively building the new embedded finance partnership and exploring the acquisition opportunities. Those efforts take time, and we don't want to rush them. During Q2, we completed our first share buyback program and our headquarter relocation to Switzerland are moving. Looking ahead, we have a clear focus. First, we commit to deliver profitable growth through three main initiatives: organic growth, partnership and acquisition. Second, we aim to further improve scalability and naturally profitability as well through risk management and AI investments. And thirdly and most important, we will confirm our EBIT guidance for this year, aiming to deliver EUR 67.5 million earnings before interest and tax, what is again around 50% growth from last year. Let's take a closer look at Ferratum business. Revenue increased 10.9% and EBIT by 44.2%, which is extraordinary strong performance. Our H1 focus was three things: improve credit risk and integrate the Sweep mobile bank app in Finland and Latvia customers and optimizing our digital marketing activities. Marketing, risk and data science teams to cater with external partner utilizing big data and latest AI tools to improve our digital and marketing bidding with amazing resulted in doubling our ROAS, return on advertising spending in piloted countries. During H1, we completed the technical preparation needed to onboard our embedded finance partners on to our platform to expand our distribution network. This ground work ensures seamless integration between our system and our partner system, allowing them to offer a financial solution to their end users. This is, by the way, what I'm personally extremely excited. Looking ahead, we are focusing to scale other countries' Sweep mobile bank app in the Ferratum customers. We aim to boost our profitable growth through organic growth, partnership and acquisition. We will improve our scalability through automatization, data, AI and risk initiatives. And our target addressable market is EUR 24.9 billion, and we only hold 2.3% share of that, giving us plenty of growth potential. We also see outperforming Ferratum 2024 original EBIT target. Good. So looks great. Let's dive into CapitalBox business. During H1, we focused on accelerating growth initiative and it paid off really, really well with a 43.7% increase in revenue. EBIT was minus EUR 2.5 million due to higher credit loss reserve, mainly driven of strong portfolio growth and lower recovery in some industries beginning of the year. We adjusted our underwriting and risk parameters accordingly. We successfully expand our sales distribution channels, improved digital marketing performance and scale our secured lending product. We closed the acquisition of Omniveta, a Denmark-based digital factoring company. Following our strategic initiative, we continue to explore new potential acquisition to expand our product offering or enter new markets. We see the big opportunity to improve SME banking digitalization. Our target market is EUR 14.8 billion, and we only have 1% of that one. So we have a lot of room to growth. Looking ahead, we are focusing to integrating Sweep mobile bank account service and credit card in the CapitalBox offering and customers. We aim to boost growth through organic growth, partnership and acquisition, those three elements. We will enhance profitability through automatization, data, AI and risk initiatives. Our initial goal for 2024 was hit EUR 10 million in EBIT. Right now, we are tolerating lower EBIT due to the reason that there are trade growth opportunities on the market and the group overall profitability is strong in the beginning of year. Good. But let's look at our latest -- the last and the newest business unit, wholesale banking. This is the second time we are reporting as an individual. The half year have a strong start, really, really a strong start with revenue and lending portfolio growth around 170% year-on-year, generating solid positive EBIT. The new business unit CEO, Mr. Alain Nydegger, started in the Q2, and he has started to expand our strong specialist team [Technical Difficulty]. In H1, we focus on building the high-quality customer pipeline for our secured debt and payment solution product through various marketing activities. And in the wholesale tribe, we have two main product. The first is secured debt, where we offer the refinancing option for the non-bank lenders, fintechs and other selected customer set. All our lending is collateralized, and we use Multitude platform technology and data. Our second product is a real-time payment solution for the fintech, e-money companies and other banks that need a large number of the fast and efficient payment across the Europe in various currencies. Our wholesale banking tribe's focus going forward is accelerate new customer intake, focus on smart risk and disciplined underwriting process and improve underwriting scalability through automatization, data, AI and risk innovation. In our last earnings call, we promised to share our external target for this business unit today. We are confident in our ability to deliver profitable growth while maintained a strong filter in this new area, which is why we are setting a call to achieve over EUR 6 million in EBIT for this year, what is quite amazing result as a first year. Good. But let's jump to last part of my presentation. So as a part of our ESG program, we have set the call for each ESG elements to achieve by 2025. In H1, as a part of our CSRD readiness initiative, we made the progress in identifying our material environmental impact through lending activities. We also improved the data quality for Scope 3 financed emission estimation. Now financed emission are mostly based on our PCAF data quality score of 4 and in H1, our social metrics demonstrate our success in managing customers and employee satisfaction. We introduced a new rotation policy to further improve the work-life balance for our employees. Employees can now work remotely from various locations worldwide for up to 2 months a year and combine work with vacation. And that's something that our people have really loved it, and we can see that this help us to recruitment initiative as well and find like the best talent worldwide. Picking off the year, we implement all employee shareholder program where all eligible employees receive 53 shares, a total of around 25,000 shares were distributed. With this initiative, we aim to align the interest of employees and shareholders. As for the diversity, in May, we welcome a new Board member. With this appointment, the female representation on the Board stand at 50%, which align with the company's commit to the diversity and inclusivity at all levels. We have piloted and tested ESG risk assessment tools to better analyze our supplier and clients in the wholesale banking segment. We also continue our work initiated within the CSRD readiness program and engage the external support there. But now I want to thank everyone for an incredible achievement and support the H1 on this year. And I will hand over to Bernd to go through the deeper H1 financial performance. Thanks, everybody.

Great. Thank you very much, Jorma. Good morning to you all. My name is Bernd Egger and I will run you through the financials for H1. Thank you very much for your interest in Multitude's earnings call. I will present to you details on financial performance for the first half year, key financials and balance sheet metrics, data on asset quality and credit losses for those who participated in the Q1 call. This was one of the focus areas during Q1, together with the growth dynamics. And finally, I will give you an update on funding and cash where we have made, again, significant further progress during the last 3 months. Let us get started and talk about P&L. The key messages on P&L performance for H1 that I want to bring across is, message number one, financial performance has characterized a very strong growth dynamic, essentially the continuation of the dynamics that we have presented already in Q1. So both Q1 and Q2, very dynamic growth development. Secondly, message number two, actions taken to improve credit risk performance are yielding strong results already during Q2. Overall, the credit risk performance has improved considerably as a consequence of the successful actions taken during the last couple of months. Let us go into a little bit more detail and talk about the performance metrics. Interest income, which is essentially equivalent to net revenue and the historic format is representing a significantly accelerated business dynamic compared to last year, plus EUR 18.74 million, up to EUR 128.8 million. For Q1, we had presented an increase by EUR 9.9 million compared to last year, now we are essentially doubling that. Now the business teams have managed to maintain this excellent growth momentum and to keep growth rates on the fact at the same level. For H1, this is equivalent to a top line growth of 17%. And as Jorma has pointed out, super important note from my perspective, at least, the balanced growth drivers. So all three segments are growing at double-digit rates, at least the wholesale banking unit with more than 180%, 3-digit rates. Net interest income. Interest expense is obviously a topic in this economic environment, interest rate expenses or interest expenses increased quite significantly compared to '23 H1, but remained during Q2, essentially on a similar level than in the last 2 quarters or even a bit lower adjusted for one-off expenses associated with the successfully issued new bond '24 to '28 bond. In absolute numbers, interest expenses are at EUR 18.67 million for H1, which compares to EUR 8.83 million in H1 '23. Drivers behind the increase are higher reference rate and expiring of relatively cost-efficient term deposits. Secondly, significantly higher business volume. So if you compare, for instance, H1 '23 business volume to H1 '24, now the portfolio is larger by -- net portfolio is large by EUR 140 million. And finally, EUR 1.4 million one-off expenses effective in Q2 '24. This relates to the new bond. And this is composed to call premium on the old bond, accelerated write-off on capitalized expenses related to the old bond and in addition to that, bondholder consent fee of EUR 200,000 related to the relocation. And by the way, a proportion of bond issuing costs for the new bond will be captured in Q3, as the transaction actually fell in 2 quarters in Q2 and in Q3. So factoring in these one-offs gets us to economic like-for-like finance expenses level of EUR 17.3 million, and as pointed out, same level as in the previous quarters, and in fact, adjusted for these one-offs, slightly better than expected. This results in net interest income of EUR 110.2 million for H1, which compares to EUR 101.3 million, and hence, net interest income is growing by 8.9% in relative terms, 8.8% -- EUR 8.9 million, 8.8%. After foreign exchange result and hedging costs. And by the way, we've cut these expenses in half over the last 6 months, minus EUR 1.3 million, and after other income, this results in net operating income of almost EUR 110 million, EUR 109.1 million to be precise, versus EUR 98.9 million previous year, an increase of EUR 10.2 million or 10.3%. The conclusion on business dynamic and consequently on operating business development before and after funding costs, from our perspective at least, is that the ambition to accelerate growth has been paying off during the first half of the year. And this is one of the most relevant messages that we want to bring across and we consider that quite encouragingly positive message also for the remainder of the year. Let us move on and focus on operational expenses and expenses incurred from credit losses. I would like to address credit losses first. To recap a bit on Q1, credit loss performance -- credit loss level in Q1 was EUR 28.28 million, which was above the optimum level and also above '23 levels. Drivers were, on the one hand side, positive higher growth dynamics than in '23; secondly, exceptionally low credit losses in early '23 in some businesses. So this means low reference levels, this was particularly the case with CapitalBox during Q1. Then indirect effects of higher interest rates via temporarily lower forward flow prices and in the end, let's face it, loan quality was not on expected level in a limited number of markets. This holds true both geographically and industry specific. This was the situation in Q1. Now during the last couple of months, business and risk teams have put a lot of emphasis on credit loss levels, ideally, and that was the ambition without sacrificing too much of the very positive growth momentum. And as a result of these efforts, Q2 performance in risk underwriting and portfolio management turned out to be really convincing in my view. So for the first half of the year credit loss levels are at EUR 52.1 million. This is EUR 9.9 million above previous year's level. Credit loss levels Q1, to recap EUR 28.3 million; credit loss levels Q2, EUR 23.8 million. So this is a reduction by almost EUR 4.5 million compared to Q1, a reduction of credit losses by 15.7%. This, in turn, does not necessarily mean and is not to be understood that all metrics are perfect. And we will take a more granular look when we discuss segment performance, but applying a consolidated view, this is a really strong risk performance. Key success factor, still talking about the P&L, obviously, next to revenue and credit loss development from a P&L perspective is cost management. And let me also do a quick recap on operational expenses to put H1 into perspective. Expense management worked very well during '23. We essentially kept cost levels flat during this high inflation period, personnel expenses not only behaved degressively but remain on the same level in absolute numbers. In Q1, we have reported an increase of around about EUR 1 million. This was due to overall cost level increases, and especially to the new initiatives. So investment in CapitalBox and in Wholesale Banking to make sure that we have the resources in place to grow the business. The situation for the full first half year is the same. Selective additions to the team and overall cost increase resulted in EUR 2 million higher personnel expenses than last year. And again, this is mainly to be seen as investment into our growth ambitions, cost pressure itself is largely to be absorbed by efficiency gains. That is the overarching principle for the whole organization. Operational expenses. General and admin expense is up EUR 1 million. This is for the first half year in total. This is still a moderate growth of 6.8%, with a large number of strategic projects being the drivers of that. Depreciation is essentially offsetting general and admin expense increases. So the big picture when it comes to cost structure is there is cost pressure. There is costs driven by the new initiatives. We look at this as an investment and efficiency gains from automation and from establishing a lean and scalable organization are mitigating those cost increases. Now how do these developments in revenue, finance expenses, cost of credit and OpEx translate into profitability metrics for H1. EBIT up to very strong EUR 28.3 million for the first half. This is all-time high on a half year basis. This is an increase of 34.8% compared to EUR 21 million last year. Profit before tax EUR 8.4 million, slightly below the H1 level. Tax expenses, EUR 418,000, which is equivalent to an effective tax rate of around about 14%, a little bit less, so exactly on target level. And finally, net profit with EUR 7.3 million, practically on the same level as H1 '23 with EUR 7.6 million. Factoring in the one-off effects in finance expenses that I've explained, the like-for-like result would be as follows. Adjusted before -- profit before tax H1 '24 would be EUR 100,000 above H1 level, and adjusted net profit EUR 8.7 million, so EUR 1.1 million above the level of H1 2023. On the next page, balance sheet. Assets will be pretty short. I mean in the end, it's fairly easy to describe the dynamics here. We see an increase in portfolio size, and that is essentially offset by a reduction in cash with an element of cash inflow at H1 from the new bond that we issued in Q1 -- in Q2/Q3. And currently, by the way, the capital market debt stands at EUR 75 million. On the next page, liability and equity, EUR 184 million equity, which basically represents a net equity ratio of 24%, pretty strong. There's a little bit of more information in the presentation on the new bond. I will summarize that very briefly. We have issued a EUR 18 million new facility. You might ask why is debt securities at EUR 99.2 million in June, it has to do with the fact that the transaction fell into 2 quarters, as I've pointed out, and the final settlement occurred on July 8. So currently, the corresponding or the updated position is EUR 75 million. So liability structure, well in order, and equity structure also very well in order. Maybe more importantly, let's talk about the segment performance on the next slide, and let us always start with consumer banking operating under brand name Ferratum. In short, without repeating what Jorma has said, but I would like to reiterate that Ferratum has been performing very well. It shows impressive growth, high scalability and very high resilience with significantly improved credit loss performance, especially in Q2 this year. This is reflected in numbers as follows: revenue up EUR 10.5 million to EUR 107.6 million. This is an increase of almost 11%. And this is a quite remarkable achievement. For comparison purposes, full year '23 versus '22. And growth -- revenue growth slightly above 4%, now growing by a factor 3 almost. So a really, really strong performance. Credit loss impairments, excellent performance, and I'll tell you why credit loss is lower by EUR 4.5 million versus Q1. This is equivalent to a reduction by 18.5%. And this demonstrates the great performance by essentially all the business team, the underwriting team, portfolio management and also collections, so successful joint efforts. High scalability, I've highlighted that already pretty much flat overall cost structure and EBIT going up from a little bit less than EUR 20 million to EUR 28.4 million, increasing by more than 44%. Profit before tax, up from slightly above EUR 10 million to almost EUR 15 million. So in short, very impressive performance of consumer banking during H1. I would like to continue with CapitalBox. We are, again, very satisfied with revenue performance. We see a topline growth of 44%. So here, we now really have gained momentum, driving up revenues by 4.9% to above EUR 16 million. Again, this is all-time high. You know that we had a little bit of a dip over the last couple of years and then gradually increased top line development, now EUR 16 million in one half of the year is all-time high. Credit losses, again, I need to reiterate that performance has not been satisfactory during Q1. In absolute numbers, Q1 and Q2 are pretty much on the same level, EUR 4 million each, but we see a slight relative improvement in Q2 already in CapitalBox business, credit losses over interest income improved by 3.3 percentage points. Going forward, though, this means that the main focus will be still on credit loss management and maintaining -- finding and maintaining the balance between growth and risk. Cost, very significant increase in revenues obviously requires more resources. This explains personnel expense increased by some EUR 500,000 and general and admin and marketing expenses up by some EUR 800,000. And by the way, these cost increases include the effect of the newly acquired Omniveta factoring business, which we also expect to become a meaningful revenue source and a profit driver. As a consequence of all that, higher growth, elevated credit losses with a positive trend and higher credit and higher cost levels, which we see as investment in future growth, EBIT contribution currently negative at EUR 2.5 million. As Jorma has pointed out, the target still is to achieve meaningful positive EBIT contribution for the full year, but we're willing to accept somewhat lower EBIT levels at the benefit of utilizing growth opportunities. Let me finally conclude the review of business unit performance with wholesale banking. Revenue up to EUR 2.8 million in Q2, EUR 5.1 million in H1, which makes it appear to be realistic to achieve double-digit revenue level already in the first full year of operation. This was one of our internal targets, and it actually looks very good to get there and to achieve that, together with the EBIT target that Jorma has pointed out to reiterate and repeat that EUR 6 million for the full year. Credit loss performance. It's a collateralized business. So the pledged assets de-facto covered expected credit losses, hence, hardly any credit loss impairments. Quality of all portfolios is on track. So this is in really good shape. As an early-stage business, it's quite natural. Personnel expenses increased by some EUR 500,000. We simply needed to and need to build up the resources to run the business in a proper fashion, and we are well on track in that respect. Overall, very promising performance, almost EUR 2.5 million EBIT at breakeven level and profit before tax level. On the next page, you are familiar with this slide. I think what is important here is the trend. This is about asset quality. You see a long term depressive development when it comes to credit losses over portfolio size. And what I would also like to highlight is the improvement from Q1 to Q2. So from 4.2%, which is pretty much still in line with the average over the last 2 years, we see a further improvement to 3.8%. This means the impairments as a percentage of portfolio size have reduced quite significantly, which means asset quality has improved during the second quarter. Next page, also something you are familiar with and no need to go into too much details. The key message here is simple. We have deployed cash funds for the business, therefore a slight reduction. Total cash at EUR 219 million. Cash is absolutely on target level. Nothing more to add here. Maybe one slight point, more than 40% of deposits have residual maturity. This brings me to the next slide to funding. Also, from a funding perspective, we are pretty much exactly where we want to be. Of course, we would like to see cost of financial resources, funding costs to go down. This is something that we expect mid- to long term. From a structural perspective, we do have the target structure in place. We are concentrating on deposit funding, with activities on the capital markets. I've highlighted already that we have replaced '25 bond successfully at, by the way, 100 basis points lower cost, 75 basis points lower margin. And that means that we have no debt capital market instruments that fall due within the next 4 years, which I think is also very comforting. Weighted average cost of debt funding is stabilized. So overall, we are in good shape to support future business growth. I do hope you found this update of interest and many thanks for listening. Please do not hesitate to raise any questions you might have. Jorma, I hand back over to you.

Good. I hope you all can see and hear me well, it's good. So thanks, Bernd. And like you see, I think it's our successful story continue onto the further. And like I say in the beginning of our call, we want to leave for you today those four key takeaways. We achieved an incredible 70% growth in revenue, all our three business units deliver at least a double-digit revenue growth, we delivered amazing 34.5% growth in earnings before interest and tax and we confirm our EBIT guidance on this year. And saying that one, I think we want to thank everybody and closing our presentation and ready to take questions.

[Operator Instructions] And with this, I hand over to Jorma and Bernd.

Good, good. We have already got a few questions on the chat, and then we are happy to take more. We just -- Bernd, do you want to start shooting question -- at the answers or shall I start?

Yes, absolutely. The first one is the -- I think this is [ Stefan Hershoff ].

Yes, exactly.

The interest expense...

Yes, go ahead. You first.

The interest expense is very high in Q2 with almost EUR 11 million, including hedging costs. What is the outlook approximately for the next quarters as 3 months Euribor is declining since a few months. How much of the cost today are moving from Finland to Switzerland? On the first one, it really depends on how we see it. So EUR 11 million is the full financial expenses plus hedging cost and the finance expenses in the reported form is EUR 10 million, minus the one-off. So essentially, economically, it's EUR 8.5 million. The -- so what is driving that on the one hand side is the business volume, EUR 40 million more than last year. Secondly, the one-off of this EUR 1.4 million, so this is nonrecurring. I have to add, though, that the total one-off expenses to the replacement of the old bond with the new bond is EUR 2.8 million, out of which EUR 1.6 million will fall into H2. So this also goes to your question, what the approximate level is going to be for the remainder of the year. I'm a little bit reluctant to give specific numbers. You are right. Euribor is going down. We have to accept, however, the fact that decline in deposit rates will be slower than Euribor development. Why? Because we are seeing the process of replacing old 24, 36 months, relatively cheap old 24 and 36 months deposits by new deposits, which are on a higher cost level. So this means that the decrease in finance expenses will lag behind the drop in Euribor. That is something that is just a factual nature. It is something we have to live with. Other than that, I think -- yes, please go ahead.

And maybe that's like a fact base where we are. If I a little bit support, Bernd, for you that we're looking on the further that, of course, interest rate environment when it's decreases, impact is coming to slower. It's not coming to immediately impact for us because we have a term deposit and you have to respect the term deposit period, and we have a lot to increase our term deposit during the last few years to try to stickiness our refinancing position as well. And then the other things what we have been successful doing during the last year, but I think you don't see the numbers today yet, but we will see the longer term is that we have started building the natural hedging on the different currencies, example, the Swedish krona is something like we have -- our team are really successful to building the natural hedging. And we have a successful Swedish krona-based deposit portfolio what is helping us in the longer term. But of course, the short term, you cannot see the impact there immediately. Sorry, Bernd, you can continue if you want...

I guess, this covers this question. I mean there are one or two other questions. One raised by...

Yes, maybe next question is actually this -- next question is this Stefan Hershoff and [ Harald Hoff ] have actually the same question, about the relocation cost from Finland to Switzerland. And that's a little bit -- maybe we can combine these two questions from Stefan Hershoff and Harald Hoff. So Bernd, do you want to start and I try to help you?

Yes. The question number one is how much is moving from Finland to Switzerland cost. The second one, quite equivalent, from Malta to Switzerland, what are the cost? I mean two elements of the answer to that. I think we will be a 7-digit but low 7-digit amount and they're of one-off nature. So we do not expect a significant increase or recurring increased levels. When we talk about costs, then they are of one time because this has to do with, whether we like it or not, tax rulings, all that requires a lot of tax advice, legal advice, we want to prepare this properly. And this is why one-off level is quite considerable. So -- and as I said, this is a lower 1-digit million euro, between EUR 1 million and EUR 2 million roughly.

Exactly, exactly. I don't have anything to add here. I think that should cover. And that process are moving. That's the most important. Then I think we have a next question on the row, we have a little bit touching on the funding topic as well. Dr. Karina Lergenmüller have a question on the interest expense have risen by 114%, which is huge. This means that profit after tax is down on the previous year. How do you assess this view of the call of increase in profit by 50% per year? Bernd, you want to start? Or I start and you help or...

Yes, I'm happy to start. I mean -- and I think I should connect this question with another question raised by Karina to what extend does it make sense to use EBIT as a targe. For a bank, the key success or the key factors are higher interest expenses, and I would like to combine those naturally. So I think I have tried to explain why the interest rate levels are higher and why the interest expenses are higher. And to profit guidance, we have given the EBIT guidance back then in June 2021 for a number of reasons, totally different interest rate environment slightly different business model. And then over time -- and this was the logic. So we wanted to bring across the message that both in terms of revenue development and profitability, we are able to grow the business significantly. Now over the last 2 years, as you're right -- for about 2.5 years, as you rightfully pointed out, the interest rate environment has changed. And this is why we already have changed the approach. And in the Capital Markets Day, I think it was the 21st of November last year, we have issued the guidance focusing on net profit, which is EUR 30 million net profit for 2026. So we have already reflected essentially your thought that this is certainly the right way of looking at it in the new guidance for EUR 26 million, EUR 30 million net profit, which, by the way, is an annual increase of 28% from 2012 to -- from '22 to '26 per year.

Exactly, exactly. Yes, that was -- I did not have anything else to add it here. I think this 50% growth -- profitable growth are coming more the earnings before interest and tax, it's like EBIT guidance. But like Bernd rightly mentioned that we have recognized ourselves that challenge as well, and we have already doing the correction there and future, we will guidance on the basis of net income. But we did not want to change this during the period, what we have already guidance because we feel that if we start to change it between the period, then some people can think about that we try to hiding something. And that's the reason what we didn't want to change that. We want to end in our promise period end of 2024. And then when this is over, then we like overlapping starting like this new net profit guidance period for the '25-'26.

We have two audio questions waiting on the line. So maybe we should take them now.

Yes.

Absolutely. Then we will start with the questions by Marius Fuhrberg.

First would be, could you provide a split for how much the impairment losses were due to credit losses? And how much due to provisions for new business?

Sorry, can you repeat the question? It was a little bit hard to hear. Can you repeat that one?

Yes. With regard to the impairment losses, how much of those were due to credit losses or actual credit losses? And how much was due to provisions for new business volumes?

Yes, get it. Okay. Bernd, do you want to...

Yes. In the report, there is more detailed information on how the actual stages behave, Stage 1, 2 and 3. We certainly can -- and maybe this is also in combination with the question that Harald Hoff raised SME, if I may combine those two questions, why did the impairment increase -- why did impairments increase from EUR 2.5 million to EUR 8 million in SME banking. I think this is something we can give a little bit of more an update on what the drivers are, to what extent is this growth driven and to what extent this is portfolio -- performance driven. And here, again, we need to differentiate a little bit between the businesses. In the SME business, growth is a substantial factor plus, in the end, almost 40% when it comes to portfolio or 44% in terms of revenue. So that is a factor. But I'm happy to isolate that in the next presentation and give you an update on what is driving how much of the impairments.

Okay. And another question of mine would be comparing your Q1 and Q2 results, it appears that the majority of the improvement for the EBIT comes from the improvement in credit losses. So looking forward and with regard to your guidance, where you still need some improvement on EBIT for roughly EUR 10 million or EUR 9 million compared to H1, whether you expect further improvement? Is it coming from rather the top line improvement? Or do you assume that credit losses will decline further?

Well, in the end, I think there are three driving factors. One is top line development. And I've also tried to explain it during the presentation that balancing those two is key. Top line development, this is a tick for now. So we have a very high and strong growth momentum in all businesses. So from that perspective, also with regard to the guidance, I'm very optimistic. When it comes to credit losses, let's face it, Ferratum performance Q2 excellent. I mean this is not something -- it's not realistic to see such an improvement each and every quarter for the remainder of the year. So here, it's about to make sure that we stabilize credit loss performance long term and remain as close as we can to this excellent level. CapitalBox, a slight improvement already during Q2. I've mentioned it that we have some 3.3% in terms of credit losses of revenue percentage points improvement second quarter. So here, we will need to see further improvement during the remainder of the year. At the same time, we don't want to give up the growth momentum. So we don't want to optimize for credit losses only and give up the momentum that we see in top line. And in our wholesale business, I think, I've also pointed that out, currently, all portfolios that we have, all the portfolios that have been financed by the wholesale business banking are performing very well. So yes, the expectation is that the performance plus the fact that we hold significant collateral will keep impairment losses and actual losses, if you will, very low. And those need to be the three drivers in order to get us to the performance that we have indicated in our guidance. As regards this -- and then, Jorma, as regards to the need to have a significantly stronger EBIT level in the second half. I mean this holds true for the full period from '21 to '24. So you can only increase 50% year after year by definition if the second half of the year is significantly better than the first half. And this is something that we've seen over the last 3 years each and every time we've seen an almost linear improvement in that respect. And this is why we actually confirm the guidance also for this year.

I don't have a lot to add on that one. Bernd's, I think, was a very, very well constructed answer on that topic. I mean it's in general, like Bernd's explanation, those three elements, you have to balance in that one. It's not something like one -- there is no like one tricky thing is what -- the improved credit losses we will achieve the guidance. That's not the point. I think it's like the balancing -- the whole year our team must be in the balancing on the -- between marketing activity, sales initiative, the portfolio quality management, and of course, the overall the cost management there. I think it's -- that is the balancing there. It's -- and I think that those business units, we're doing the same balancing. We are currently seeing that Ferratum -- like you see that the numbers Ferratum performing really, really well. They can deliver the good growth and the strong profit growth there as well. And the CapitalBox SME part, we see the growth opportunity lots. So we investment there, and we tolerate the loss there. And the Wholesale Banking have pushed into really strong with the profit and growth side. So we're balancing that one naturally. So that's the -- that's a theme of the second half of this year as well.

There's one more question related to refinancing. Maybe I'll take this one to essentially close off the topic, funding and refinancing structure, if you agree? Karina Lergenmüller, how is refinancing carried out for consumer banking and SME banking? Exclusively through bonds and equity. And isn't that a very expensive form of refinancing? Yes, 100% correct, and this is why we are trying to avoid using [Audio Gap] of the two bonds and equity as funding source for lending business. The consumer business is almost exclusively represented on the balance sheet of the bank, which is 100% group subsidiary. And that means that we use wherever we can, deposits is the main source of funding for the Consumer Banking business. SME business is technically -- I don't want to be too technical here, but it's slightly different. Loan origination is happening via CapitalBox AB in Stockholm. And we use deposit funding indirectly via securitization model that we have currently in place. So the overall principle is to use deposit as main funding source wherever we can for exactly the reason that you have pointed out.

I think if Marius audio question is -- it was done, was there anything else from your side?

No, that's it from me.

Super. Really big thanks, Marius. Sorry, we are so efficient, we try to -- thanks, Marius, for your question. It's -- we have one question coming on the chat here before we take next audio question. That's, I mean, [ Tim Odoms ] and the question is, thank you for presentation, I have got two questions, please. What is your expectation for credit loss and NPLs against the weakening economic backdrop in Europe. That's the number one question. The second question, some banks are retiring from consumer financing. Continue to talk a bit about the potential acquisition in consumer financing. And then could you also give some color on potential target as SME? And then the third question, could you quickly remind us on the remedy action to bring down credit losses? Maybe I can -- maybe Bernd, you can take credit loss part and continue -- partially it's answered already but maybe you can add it that as well. And maybe I can take the acquisition part. I think we see it very clearly that consumer and SME market, the unsecured financial market in the Europe, it's moving, it's changing quite quickly. Way too many banks, they have started to rechange their strategy, and that then give us lots of opportunities. So there is multiple assets on the market on the available. And we are actively looking those ones, we have to communicated that one. The key question there is that how well this particular company have treat their customer as like customer experience point of view and how well they have running to the digital underwriting process there as well because that's the field where we want to stay in there. We don't want to go into beyond that one. And we will see that market are suffering with a few reasons. It's not the particular reason that the consumers don't need the funding. It's not the particular reason that you cannot make profitable business model with those customer segments as well. But this is more the question that companies who are the banks and the nonbank lenders who are operator, they have an increase in the funding cost and the models are billing on the way that they are too manually loaded. So their profitability is not on the place. And that's something that we can help with our technology and our growth platform, and that's the reason why we are super interesting on to expand our growth platform. But like I say, it's -- we don't want to rush those activity. We want to look to the best partners and the best customers. And even the economical situation is a challenge in the multiple countries. We see that there is always good customers who need to temporary finance in the company and the consumer side, both sides. So that's the more or less our thoughts there. It's -- and we see that this is a great opportunity for us to utilize our growth platform, our technology, our underwriting competence and our funding platform. So yes, that's our thoughts there. I hope we can speak more deeper in the near future as well. It's -- but maybe historically preaching this in the partnership part that this is a little bit same situation with the partners as well. So there is plenty of the interesting partners on the market who have a big customer base, and they want to increase their own customer experience to integrate the embedded financing solutions. And that's something where we have seen a lot of demand. And finally, quite many, the partners, they have to take this more serious and they priority list them because they want to focus -- increase their own sales activity and marketing activities, and they see that companies like Multitude or the CapitalBox or the Ferratum, we can integrate our financing solution that seamlessly embedded their offering, and that increase their profitability and their sales. And that is something that we are extremely excited as well in this market situation. So this acquisition of partnership is going a little bit hand to hand there. Sorry, Bernd, maybe you can take credit loss part there.

Yes. To recap, the question is could you quickly remind us on the remedy actions to bring down credit losses. I will try to be brief, but I need to highlight a couple of aspects. So one is the more technical, structural topic. This is a permanent issue. So we have 10, 15 people in data science team, they develop models, they test models, they test hypothesis. The ambition is to improve the [indiscernible] index. So it's actually the predictive power of underwriting model. So that's factor number one. This is a permanent process. And I think here, we have improved quite significantly over the last couple of years. Second one, business model related in the SME business, for instance, we gradually shift business away from industries that are affected by the -- negatively affected by the economic conditions in which we are -- transportation is one of those examples. Naturally, we are not overweight in those industries currently. So this is the industry competition, then the portfolio composition here, we have a trend as an organization towards longer maturities, lower risk classes, collateralized and securitized lending, both in the CapitalBox business. And by the way, this is the rationale behind the wholesale business, which is, in the end, is fully collateralized. And then lastly, I think we have operational improvements. This has a lot to do with interaction with clients, with collection performance, where a lot of intelligence is flowing into these processes. So those four factors taken into a basket of actions is the art of improving credit losses going forward. I guess we have...

I think we have covered all chat questions.

And I think two more audio questions waiting.

Okay. Go ahead. Let's move on.

Absolutely. So we will now move on with the questions from Frederik Jarchow.

As you confirmed your guidance, can you give us the planned or expected segment split for the full year '24? This could be our first question. My second question is what is the net profit of the group that you expect for full year '24? And the last one is on M&A. Do you plan any further M&A deals until the end of the year?

Okay. Pretty -- thanks, Frederik. It's pretty direct and maybe challenge question for the directly answer those is without not expand a lot of our new detailed guidance here. Maybe acquisition part is, maybe I can start and Bernd, then you can take those easy topic like segment profitability and the net profit.

Yes, it sounds, yes.

I know. I have a very fair mood in this morning, I see that one. So acquisition part, we are currently -- it's -- we are currently very actively exploring to several the case. What is the probability that we close in those cases on this year, it's something like -- I don't want to make a commitment that we have to do in those -- this year. But if naturally they're moving and both parties, our side and the seller part and strategy, we see that those are fitting, we can see something in this year as well. But we don't have like -- we have made decision that we don't want to rush our team to order for the timetable there because we believe that it's more important that it has to be the win-to-win situation or win-to-win-to-win situation that the seller and this particular units and, of course, the Multitude part as well. So -- but we are very actively working with those few cases currently. It's on the CapitalBox and the Ferratum side, so that's where our focus are currently. So we have not so much -- we don't have a current some pipeline as like a new business unit or tribe type of thing. It is more to accelerate those business what we have it today.

Well understood. Thank you.

And Bernd, do you want to take an easier part of the question?

Absolutely. Question number one, the segment split in terms of EBIT guidance for 2024. So again, for those who are not so familiar with our guidance, EUR 67.5 million increase from -- of 50% since last guided is the target. The easy one, as Jorma -- we have promised for this session in the Q1 presentation and Jorma has delivered. We've given a EUR 6 million expectation, which -- it's not a guidance, but we've shared our expectation to see EUR 6 million in the Wholesale business. Now in Ferratum, the indication or the expectation that we have communicated in the past is 5% improvement compared to last year. We feel super comfortable with that. I don't want to promise anything, but it's not impossible to actually outperform that also for the full year. What is of main relevance to us is that we achieve the overall guidance of EUR 67.5 million. So we are a bit agnostic when it comes to shifting a little bit between those segments. For CapitalBox, this means whilst we had originally or in the past, indicated that we think around about EUR 10 million is realistic for CapitalBox during this year, we now think that we are happy, we are accepting to sacrifice a little bit of profitability, of profit performance, EBIT performance at the benefit of not giving up significant growth. That means that meaningful positive EBIT, does it have to be EUR 10 million? No, it doesn't, as long as we achieve the guidance. This is the overall principle that we have. What is of -- also from a strategic, from an investment case perspective, still the case is that -- our view is that all those businesses and all initiatives will have to be profitable. And then this brings me to the second question that you have raised, net profit for '24. This is something now we have one last half year to go out of more than 3 years of EBIT guidance, I would recommend that we complete this year as we have indicated to the public based on EBIT guidance and then shift the focus to net profit for '26, So I'm optimistic for net profit performance also '24, but we don't want to give a specific net profit guidance for this year.

All right. I think that's fair. Great. So to summarize it a bit, CapitalBox may be a bit lower than initially expected and then maybe an improvement basically stemming from Ferratum in the end?

I would not fundamentally disagree.

Good. Thanks, Frederik. Thanks. So I understand we have one more audio question or...

Yes, we have. So we have [ Frank Lehman ] in the queue.

Good execution of the plan so far. My question is to you, Jorma. You're the founder, you're the leader, you're the major shareholder. You have now achieved close to EUR 1 billion in balance sheet. The earnings that you show and the plan for 2026, I have take a note of that. But is that really -- for a guy like you and for an ambitious leader, is that really something you want to achieve? Or should you not consider that Multitude should be on slight or significantly higher level, like 2 or 3x the amount you're holding out for 2026? And if that would be your moonshot target, let's call it a moonshot target, would you consider you have the right products in the book? Would you not need to maybe further align the products you have, the operations you have, the business you do? And of course, that has consequences for refinancing, that might have consequences for the equity market, et cetera, et cetera. But what I'm a bit puzzled is that you kind of seem to be happy with the plan forward and don't develop a much, much more ambitious plan for this dynamic unit. Wanted to get rid of the question. It's not so operational, right?

No, no, it's a quite big question. It's -- and there is no really like one simple answer to it. But let me put on the way that I think we, as Multitude, we have always had it like a one approach strategy approach there. And it's always been that we have to do this profitable growth. So we didn't want to take the risk what you can -- what can hit you badly on the future. So -- and that's maybe become a little bit of a thinking process that we never want to do the big bet where you can betting the whole company. So we would rather accept the smaller growth and deliver this with a good profitable growth rather than we're doing like a big bet shot and doing like a super-fast growth in the 1, 2 years. And then if you're like stock market is not supporting us or some other external elements impact that. So that has been a little bit always -- like last 19 years -- almost 20 years now, our thinking process. But going forward now, I think it's a part of this thinking process and evaluates on the way that we -- probably this is our last year, this our dream becoming EUR 1 billion company. And we understand that the EUR 1 billion company is not -- it's not coming on the -- it's not coming to only with the current product, what we have it today. And maybe one step back side, the history as well, that we was -- maybe too long time, we was thinking that we want to be like a single product or like just like a few single product companies and scaling that one. But we understand that one that it's -- we can be extremely good with a few product, but the market size is not enough in those one. So that's the reason why we have to expand and start to build this ecosystem and more like a larger that one. And part of this EUR 1 billion mark as a market cap or the valuation dream is that I think we have to grow in the significant faster there, and we have to like build the much bigger balance sheet as well behind it. And that's something what is need the new type of the product. And that's the reason why we are doing this in two ways currently. We do this in the one way that we have set up a few new products, especially on the secured lending part, then we are now starting to digitalize the factoring credit part because we believe that it's a really old school, and there is a lot of opportunity to digitalize the factoring business in the further and around Europe. And then we still believe that this embedded finance is very early stage. It's -- if the people understanding today that embedded finance is that one, if you go to online page and you have seen there the index traded payment solution and take a loan and then it's going to somewhere else, I mean this is so poor customer journey and experience point of view, when you can really build it like a partner to customer journey or a customer take a loan the part of the purchasing process that they don't even -- they are really like smoothy. And they don't have to jump in between the page there and they don't really -- they wonder that this part of product feature. It's not like separate loan product there. And those are three things what we have started out, expand, and I personally believe that we will see in the next few years a significant increase in our balance sheet as well. Not forget our Wholesale Banking, what is the -- we have now the last few months to get it really strong management and we have started billing and there is a good pipeline, et cetera. Just -- we have just a discipline executed that one. So I am extremely excited in the coming period there. So that's my -- I don't know if this is answer for you -- directly your question, but I try to give the flavor of how I see that one. But the quick answer is that, yes, we need the bigger portfolio and we need the new product and yes, we are currently working that one. But that will take a little bit of time for us to get it done.

Okay. Okay. No, thank you very much. Jorma, we are bond investors. So we appreciate that you don't bet the house on a new business side. But I'm also cognizant of the fact that your market cap in the last 24 months was significantly undervaluing the company and that your equity traded significantly below book.

Exactly.

And that of course is a hindrance, if you want to raise equity just in case -- sometimes you need that equity to grow and make -- enter into this new business. If the market kind of matches your equity, would you consider potentially issuing equity in the future? Or is that something -- because the shareholders come back to, of course, give some -- how can I say, give you some -- you as a major shareholder, you have a certain degree of control with your shareholding, would you rather give a pass on that? Because that is -- that aspect.

Yes. I think it's like -- I think it's using the equity as the instrument on the growing to business, I think it's -- of course, it's not the no-call. We have to do in this respect the current shareholders way. So it's doing this in the undervalued or the wrong valuation, then we have to find alternative components there, alternative funding tools. So that's the reason why I think it's a little bit like -- we personally prefer more than like to find the diversificate funding source there rather than just going to raise the equity for the -- closing the acquisition deals example, what we are looking, or to accelerate our books on the higher. Good. I think we have covered all audio questions, and chat is empty on the new questions as well. So I think we want to thank all of you to our investors and stakeholders and our people for the amazing taking of this year. And let's continue the same speed on the second half of this year, and let's keep in touch.

Thank you, everyone, for joining the call. This concludes our call for today. So thank you, and goodbye.

Thanks, everybody.

Thank you.

Bye.