Multitude AG (0R4W) Earnings Call Transcript & Summary

Good morning from Helsinki, Finland, and welcome to Multitude Group's Earnings Call for the first 6 months ended 2026. My name is Adam Tönning, Head of IR and Treasury, and I'll be your host today. Today's agenda, Multitude CEO, Antti Kumpulainen, will walk you through the period's results, which will be followed by a financial review by our CFO, Bernd Egger. Following the presentations, we will open up for questions over voice and chat. Antti, please go ahead.

Thank you, Adam. Good morning, and thank you for joining us. My name is Antti Kumpulainen, CEO of Multitude Group. During today's call, our CFO, Bernd Egger, and I will walk you through Multitude's H1 2026 results. The first half reflects continued disciplined execution of our strategy. We are seeing stronger diversification of our revenue streams, further improvement in asset quality and a clear acceleration in profitability from the first to the second quarter. Let me first briefly recap who we are and where we are heading. Multitude is a pan-European FinTech operating with one single EU-wide banking license and serving customers across Europe. We operate 3 business units on one shared growth platform, serving consumers, SMEs and institutional customers. The company was founded in Finland in 2005 and has been listed on the Frankfurt Stock Exchange in the Prime Standard since 2015. In 2025, we generated EUR 257 million in revenue and EUR 26.6 million in net profit. We also continue to maintain our dividend ambition of distributing between 25% and 50% of annual net profit. So this is a business with more than 2 decades of operating history as established regulated platform and significant opportunities for profitable growth ahead. Today, there are 6 key takeaways we would like to highlight. First, H1 net profit amounted to EUR 13.1 million. Importantly, profitability accelerated clearly during the second quarter, in line with the expected phasing of profitability through 2026. Second, asset quality continued to improve. Impairment losses decreased by 17.7% year-on-year to EUR 34.9 million, while our loan and investment portfolio continued to grow. Third, fee and commission income more than doubled to EUR 12.6 million compared with EUR 5.3 million in H1 last year. This demonstrates continued progress in diversifying our revenue base and building recurring fee income streams. Fourthly, we completed the acquisition of Sortter. The transaction supports our revenue diversification strategy and adds complementary capital-light fee income business to the group. Fifth, our strategic investments continue to perform strongly with our share of results from associates doubling to EUR 2 million from EUR 1 million last year. And sixth, we confirm our EUR 30 million net profit guidance for 2026 together with the outlook of 20% annual net profit growth in years 2027 and '28. Turning to the group highlights for first half of the year. Revenue was almost EUR 127 million. The development reflects deliberate changes in product offering and portfolio composition and the corresponding lower interest income, partly offset by very strong growth in fee income. Fee and commission income increased by over EUR 7 million year-on-year to EUR 12.6 million, driven mainly by Consumer Banking and now also including the contribution from Sortter since the consolidation date. Sortter will continue operating as an independent company under the current management who have demonstrated their ability to build, run and scale the business extremely well. Sortter is a pure digital financial platform and a market leader in Finland with more than 30 banking and financing partners on one side of the platform, offering consumers and SMEs financial solutions and on the other side of the platform, over 120,000 credit applications made last quarter only. Now, it's your time to make your own evaluation about Sortter business and its impact for Multitude's strategic value as the Sortter full year run rate for revenue is EUR 25 million and profit of EUR 5 million with a 50% growth. During the first half, our asset quality also continued to strengthen. Impairment losses decreased by 17.7% to EUR 34.9 million. Net loans and investments increased by 15% year-on-year to EUR 980 million demonstrating continued strong demand across our businesses. Net profit for the first half was EUR 13.1 million. This is in line with our expectations and reflects the profitability phasing we have communicated with a clear step-up in the second quarter. Going forward, our focus remains unchanged, accelerate profitable and scalable growth through organic execution, partnerships and selective M&A, continue to diversify revenues through recurring fee income and maintain high asset quality as we go forward. Consumer Banking. This is our largest and closest business unit. The first half reflects continued portfolio optimization, improving asset quality and very strong progress in fee income expansion. Interest income and profitability were impacted by deliberate changes in portfolio composition and product offering, in line with the asset quality initiatives we have been implementing. At the same time, fee income increased significantly to EUR 11.3 million compared with EUR 4.3 million in H1 last year, now also including the Sortter contribution from the consolidation date in late May this year. The portfolio continued to grow by 6.2% year-on-year and is now at EUR 537 million, while impairment decreased by more than 20%. That's a great result. This is exactly the direction we want to see, continued growth together with a stronger risk profile. Going forward, our focus remains on diversifying revenues, increasing recurring income streams, disciplined growth through organic execution, partnerships and again, selective M&As and further improvements in profitability, scalability through cost discipline, asset quality and automation. In SME Banking, the key focus remains execution, efficiency and automation on our path toward profitable growth. We do recognize that the turnaround in SME Banking has taken longer than we originally expected, and we have made changes to get there faster. We can already see the growth momentum in the portfolio. Net loans and investments increased by 15.5% year-on-year to EUR 171 million, and the secured lending now represents 32% of total portfolio. Revenue increased slightly year-on-year, while the contribution from recently originated loans is expected to materialize progressively over time as the portfolio matures. Profitability in the first half reflects a temporary investment phase supporting future growth, including organizational transformation, product development and technology investments. Importantly, while the absolute level of impairments increased driven by portfolio growth, the impairment ratio remained broadly stable. We can already see that these actions and results will push us to sustainable profitability and growth. We are currently close to a point of a breakeven, and we trust to deliver for a full year of 2027 a solid positive EBT. The transformation is happening already, and we can already see it. Wholesale Banking. Yes, Wholesale Banking continued its very strong growth trajectory during the first half. Net loans and investments increased by 37% year-on-year to EUR 271 million, supported by strong execution across the secured debt deal pipeline. Revenue increased by almost 65% to EUR 15.7 million, while profit before tax increased to EUR 3.5 million from EUR 400,000 in H1 last year. That's a big jump. So profitability growth continued to significantly outperform revenue growth. We are also building more scalable origination capabilities through automation and faster credit decisioning in secured debt, while Payment Solutions continues to onboard new customers. Going forward, the focus remains on growing the secured debt portfolio, expanding the Payment Solutions customer base and increasing cross-selling opportunities. Our ambition for Wholesale Banking remains very clear, and we continue to see substantial long-term growth and profit potential in this business unit. With that, I will now hand over to our CFO, Bernd Egger, who will guide you through the H1 financials and of course, the underlying dynamics in more detail.

Thank you very much, Antti. Welcome, everybody. Good morning from pretty cool Helsinki, Finland. Let me walk you through the H1 results. The key messages on H1 are essentially threefold. First, and this is my personal favorite, I repeat it all the time, but I think it's really from a strategic perspective, really important. We are succeeding in diversifying our revenue composition. Fee income has meanwhile become a real meaningful contributor. Second, credit losses improved materially again compared with last year. And third, we see a clear net profit step-up in Q2, especially from Q1 to Q2, almost doubling net profit, well on track for the guidance. Let us go to the details and start with revenue. Interest income, EUR 114.3 million in H1 '26 compared to EUR 128 million last year, a decrease of around about 10%. But as pointed out, this reflects the actively driven change in portfolio composition and product offering in Consumer Banking. So exiting short-term nonrecurring business, focusing on recurring sustainable business. That is what the game is about. This is consistent with our group-wide focus on higher quality and sustainable risk-adjusted returns. By the way, adjusting for the impact of exiting noncore businesses and for the impact of strategic product adjustments in those markets, like-for-like revenue would actually be above '25 level. Fee and commission income, extremely strong development in H1 increased to EUR 12.6 million compared to EUR 5.3 million, so a plus of 136%. Key drivers are, partnership-driven fee income; secondly, services to external FinTech partners; number 3, payment business; and finally, the acquisition of Sortter reflected from the acquisition date and consolidation date 20th of May 2026. So 4 independent strong drivers for our fee income business. In addition to strong fee income development, net operating income was also supported by positive fair value effect of EUR 2.2 million. This is related to positive earn-out revaluation effects from sold noncore businesses. So we're creating a lighter organization but still benefiting via earn-out from sold businesses. Also, other income increased significantly to EUR 2.6 million, which is a positive effect related to the Sortter acquisition. And finally, on another positive note, results from associate doubled to EUR 2 million in the first half of this year compared to EUR 1 million last year. As a result, net operating income was EUR 108 million, already very close to H1 '25 level despite the deliberate portfolio optimization. Again, comparing like-for-like, net operating income would be significantly above '25 level. Let's take a short look. We will go into more detail on credit loss performance. This remains to be a key positive driver when it comes to net profit development. Impairment losses decreased to EUR 35 million, an improvement of EUR 7.5 million, almost 18%. We've touched upon this in the last couple of earnings calls. We can stay on the message of further improvements in the first half of '26, especially in the second quarter. This is extremely important for us because it was not only achieved on the basis of a stable portfolio, but achieved while net loans and investments continue to grow. On cost, personnel expenses and general and admin expenses increased moderately, reflecting continued investment in our growth strategy. Selling and marketing expenses increased most visibly, some EUR 2.5 million; EUR 1.4 million out of that reflects the impact of the Sortter acquisition, which is money wisely spent, given Sortter's excellent net profit contribution. This all adds up to profit before tax of EUR 15.1 million compared to EUR 16.3 million in H1 2025. Net profit, EUR 13.1 million compared to EUR 14.2 million last year. Important to us in Q2 is the dynamics. Q2 showed a clear acceleration. Net operating income increased from EUR 51 million to EUR 56 million. Profit before tax from EUR 5.1 million to EUR 10 million, and net profit increased from EUR 4.4 million to EUR 8.7 million in the second quarter, so the factor doubling. And this dynamic is in the end, what gives us a lot of confidence for our full year net profit guidance. Let me very briefly talk about assets. There are 2 main messages I want to bring across. Number one, net loans and investments. This is super important to understand as it is also going to be one of the profit drivers for the remainder of the year. All businesses are growing compared with end 2025. Net loans and investments increased by EUR 40 million from EUR 940 million to EUR 980 million compared to last year, plus EUR 70 million. Also important, diversification. It's not a business or growth that is driven by business unit. All business units portfolios are on a clear growth path. Cash and cash equivalent, that's in the end, the engine. We hold EUR 420 million, a little bit more than EUR 420 million. Cash on the books. This represents sufficient resources to continue growing our business portfolios for the second half of this year and beyond. The increase for those who are more interested in details, intangible assets and goodwill is related to the investment in Sortter. Again, a fast-growing capital-light fee income-oriented FinTech platform, so exactly what we have been wanting to add to our portfolio for quite some time, very strong financial investment. In summary, the asset side shows continued customer portfolio growth, a strong liquidity position and the positive impact of the most recent acquisition. Liability and equity. On liability and equity side, the key message remains unchanged. You're familiar with that. Customer deposits are the cornerstone of our funding model, complemented by capital market instruments and regulatory capital apparently on the level of the bank. Deposits up to EUR 1.2 billion. Equity increased to EUR 243 million compared to EUR 208 million end of year. This increase was mainly driven by the successful placement of a EUR 70 million perpetual bond instrument in the first half of '26. That, in turn, results in a very strong net equity ratio, including regulatory capital of 24% H1. Let's take a little bit of a closer look to the respective businesses to the segments and talk about their performance. Consumer Banking remains highly profitable, while moving to a better revenue and risk profile and super important for us, it's back on growth track. SME Banking continues to invest into portfolio growth and scalability and Wholesale Banking continues to deliver strong growth and very convincing profitability dynamics. Talking about Consumer Banking in more detail. Interest income decreased by some 19% to EUR 82 million compared to last year. But as pointed out, this is a temporary reduction and it's intentional. It is driven by us exiting from noncore businesses, short-term businesses that we sold and by temporary effect related to product adjustments in a number of markets where we already see a positive turnaround trend. Like-for-like business is on a growth path. Q2 revenue in consumer exceed Q1 revenue by close to EUR 3 million. Fee and commission income in the consumer business increased by almost 166% to EUR 11.3 million, supported by both organic contribution, organic fee income stream and the consolidation of Sortter. But it's important to understand whilst the Sortter contribution is meaningful with some EUR 2.9 million, also excluding Sortter, the organic growth of fee income would be equivalent to almost doubling the fee income in the consumer business, so really top performance. Extremely positive impairment loss development decreased by more than 20%, EUR 36 million to less than EUR 29 million, so top performance. And all that results in profit before tax, EUR 15.1 million compared with EUR 17.4 million last year. And again, while H1 EBT is technically in a way, lower year-on-year, Q2 was meaningfully stronger than Q1, with Consumer Banking profit before tax increasing from EUR 5.2 million to EUR 9.8 million in Q2. So really extraordinary performance of the team. In SME Banking, net loans to customers increased by 15.5% compared to last year, EUR 171 million. Interest income picking up a bit, 2.5% growth and net operating income also increasing by close to 2%. The revenue contribution from new volumes is expected to materialize progressively over time. Credit losses remained pretty much stable in its totality; profit before tax, still negative EUR 3.5 million. But as Antti pointed out, this reflects investment in growth in automation, in data and in risk innovation. And our focus and especially the SME team's management focus is to turn this business into profitability. And we are very well on track, pretty close to breakeven and super confident that for the full year '27, we will deliver positive results. Wholesale Banking, very strong H1, a little bit repetitive, but I need to stay on the message. Interest income increased by 70% to EUR 14.5 million. Net operating income increased by 87% to almost EUR 10 million. And profit before tax, still it's an early-stage business, but already EUR 3.5 million positive in the first half of '26 compared to 0.4, a growth factor in terms of profitability, more than 7x -- actually more than 8x. Also compared with Q1, Wholesale Banking improved massively with profit before tax increasing by 1/3 from EUR 1.5 million to EUR 2 million in the second quarter only. Asset quality, long-term trend continues. You see on this slide, impairment losses relative to our total portfolio, so net loans and investments. And we see a significant decrease, which is equivalent to an increase in asset quality. Group level credit losses down 17.7% year-on-year to EUR 35 million. This is a strong result, again, particularly because net loans and investments are increasing. So credit loss is down 18%, portfolios increasing 15%. What that means is we are not only growing the portfolio, we are doing so with a much, much better risk profile. Quarterly impairment loss is also improving from Q1 '26, 1.8% ratio down to 1.6%, so really top trend. And the key drivers you are familiar with that in case you joined recent earnings calls, they remain the same, enhancing scoring and underwriting, continuous model upgrades, stronger operational processes and, of course, a focus on better asset classes. We can go a little bit more into detail, but I will speed up a bit on the credit loss development on a segment level. Key message is basically simple. This improvement in asset quality is visible in all businesses. In Consumer Banking, massive improvement, EUR 28.7 million compared to EUR 36 million, so 20.5% reduction. This is really massive. And this improvement continued during the second quarter. EUR 15 million credit losses in Q1, EUR 13.8 million in Q2. So again, really strong performance in the second quarter. SME Banking, EUR 5.5 million compares to EUR 4.9 million. So technically, in absolute numbers, a slight increase, but that is in the end, the investment in the portfolio growth, quite significant portfolio growth already. And with a time lag, we now expect also revenues to come and in the end, help us turn around the business to profitability. So absolutely well on track and performance metrics in SME are absolutely stable. And in Wholesale Banking, very low impairment losses, EUR 0.7 million, 50% less than last year. In this business, apparently, this is a less granular business, movements are more driven by IFRS requirements and reserves. But the full -- and that's the key message here. The full portfolio remains collateralized. There are no unsecured exposures at all in the Wholesale Banking loan and investment book. Funding and capital structure, as pointed out, our funding base remains diversified and scalable with customer deposits as the cornerstone. H1, we successfully issued this bond I made reference to. This is important as it strengthens equity. This is an IFRS equity instrument and is an excellent addition to deposits and the Tier 2 instrument that we issued on the level of the bank. So very solid funding and capitalization mix. An important aspect over the last couple of quarters is also that we managed to reduce funding cost -- weighted cost of debt funding decreased to 3.34% in Q2 from 3.4% and around 4% last year, so quite a significant decrease, and that apparently is also quite important when it comes to our net profit performance. In short, funding stable, diversified and cost effective. There's one final statement I would like to make as regards funding. We are evaluating the issuance of an additional Tier 1 instrument at the level of the bank in order to further strengthen the capital base and hence, the growth potential on the level of our regulated entity. Finally, capital market guidance and indicative targets. For '26, we confirm our net profit guidance, EUR 30 million. H1 profit amounted to EUR 13.1 million and the sequential development from Q1 to Q2 supports our confidence. Q2 net profit, EUR 8.7 million. So again, almost doubling from EUR 4.4 million in Q1. So the direction is clearly positive. Expected drivers to get us to EUR 30 million net profit are, number one, growth dynamics in all businesses, including Consumer Banking. So we are in a positive growth trajectory mode already and expect that to continue for all businesses. Secondly, significant improvement in CapitalBox financial result. So if we manage to reduce negative contribution and we will manage completely in the second half of the year, then this would have a 7-digit impact on net profit apparently, and we're super confident to achieve that. Sortter net profit contribution is one of the drivers. And finally, our excellent -- I really have to use this term as it actually is even better than we had budgeted, our excellent credit risk performance development. That means for '27 and '28, we, of course, stick to the guidance to improve -- increase our net profit levels by 20%, respectively. I would like to go back to the key takeaways and conclude our presentation with these key takeaways that Antti used and referred to as an opener. Net profit, EUR 13.1 million, absolutely in line with the expected phasing throughout '26. So we're very optimistic to get to EUR 30 million. Asset quality better than ever. Impairment losses down 17.7%. Fee and commission income on an all-time high, more than doubled to EUR 12.6 million. Sortter acquisition supports revenue, but also profitability nicely. Strong strategic investment performance, doubling our associate contribution to EUR 2 million. And finally, as just pointed out, I would like to reiterate EUR 30 million guidance remains valid for this year. With this, I hand back to you, Adam, and happy to move on.

Thank you. Yes. We will now continue with a question session, and we have the opportunity to ask questions over voice. We will shortly hear an instruction on how this works.

[Operator Instructions]

Very good. Meanwhile, we can start with some questions that we have received over text. Starting with questions from Harald Hof, mwb. How has the customer sentiment and credit demand developed in Q2? And what are you seeing into H2? Is borrowing appetite picking up? And are there differences across markets? Antti?

Yes. We -- the result tells already that the portfolio is growing, which means that obviously, the demand is there. And this goes around all of our segments. We have to understand now that, for instance, when we work within Wholesale Banking business, there's also underlying assets in consumer and SME lending there as well. And we can see that there's need for our Wholesale Banking solutions. So competitors are also growing or the other players in the market. When we talk about consumer business, we definitely can see that portfolios are in good shape. Our risk profile is getting better and better all the time and consumers still need credits and good quick solutions, which we can provide. Same goes for the SMEs, 15% portfolio growth. There is demand.

Very good. And turning into a few questions from Roni at Inderes. First of all, Sortter. How much did Sortter support fee income growth? And what was the organic development of fee income? And how much support to earnings?

Altogether with EUR 12.3 million fee income, essentially doubling from last year. Sortter contribution in H1, essentially the revenue generated after May 20 is EUR 2.9 million. And that means that even if we take out this EUR 2.9 million completely and compare organic development like-for-like, then this would get us to EUR 8.4 (sic) [9.4] million. So still almost doubling the contribution -- the fee contribution compared to the last year. So Sortter is super important for a number of reasons, even more strategically, I think. But from an organic growth development perspective, we are absolutely happy with almost doubling the fee income. And by the way, fee income is something that is quite meaningful already, both in the Wholesale Banking/Payment and in the consumer banking business.

Staying on Sortter a bit, a question from [ Pedri Blud ]. You said you acquired a majority stake in Sortter. How big exactly -- how big are the minority interest? And how will it impact the P&L in 2026? And I assume the Sortter revenues will go into fee income.

Yes, absolutely. Sortter income or revenue will be reflected in fee income. So with regard to the percentage, we currently hold 100%, so fully consolidated entity. And the contribution for the second half was the...

Yes. How much is it impacting in 2026?

Well, I mean, it's a little bit difficult to give a guidance for Sortter. The way we look at it is so that we see EUR 12.5 million revenue -- Sortter revenue in the first 6 months, a little bit more than EUR 2 million, EUR 2.3 million profit level. So if we assume that profit remains on the same level, then this means in the end, EUR 25 million run rate revenue and close to EUR 5 million profit, out of which between EUR 2 million and EUR 3 million, EUR 2.5 million would be reflected positively in our attitude -- results.

Yes. Thank you. Continuing with Roni's questions. Any updates on the plans regarding Lea Bank? Have you managed to advance any common strategic initiatives? And then we also have another question from a private investor on whether we have sold the portfolio to Lea Bank in Q2.

Yes. And this is -- I can start with this. So we are extremely happy with our investment in Lea Bank, and we see it as a strategic investment. It's also a really good financial investment for us. So we can see that the income from consolidated entities is obviously -- sorry, associated entities is coming quite much also from Lea Bank. So we are looking all the time what different options we have on strategic cooperation possibilities. We have to remember that these are 2 independent companies, Multitude and Lea, which are operating fully independently. Yes, we did sell our prime lending portfolios to Lea Bank since that's the business that Lea Bank is much more close to. And it makes more sense that they can operate -- continue operating in those portfolios, and we are then focusing more on our customer base that we already have. So yes, we sold a couple of portfolios in the Nordics to Lea Bank.

Indeed. Thank you. We have a few questions on share price development in general and versus our vision of EUR 1 billion valuation 2028. How do you see the path forward to this target?

First of all, what I can say about the targets is obviously that our net profit guidance, we can confirm that EUR 30 million is where we really see that we are going this year, followed with 20%, '27 and '28. So until now, what we have guided during the last 5 years, actually 6, I believe, already, so we have kept. And we see that we are diversifying our business. We have much more fee revenue coming in. So we are expecting that to reflect, of course, in the valuation, which is then decided by you, our investors, in the market. I'm confident that we are really on the right path. We have to continue keeping our promises. We have done it so far. We are diversifying. We told you a few years ago, we will diversify. We have done it, and we will continue on that path.

Just one sentence, if I may ask you, for the first time, where more than 10% of revenues are contributed from fees. So this is no longer a tiny add-on. This is core of our strategy. And apparently, it could have a positive impact on valuation as well. I'm not giving any statements on how we look at it. But theoretically, one could assume that an increasing revenue stream that is not tied to risk income that's not tied to a capital-intensive business that is growing in the case of Sortter, 50% plus. Without Sortter, we're growing the fee income 50% plus. So I would at least see reasons why -- reasons to be optimistic about the value creation potential here.

A bit on the same topic, we have a question on how we look on buybacks over high dividends. And what is our reasoning there, Bernd, in comparing these 2 options?

Well, in the end, there are pros and cons for both. We did the buyback program a while ago. I think currently, focus should rather be on generating profits and distributing profits to holders of all equity and debt instruments, which means rather dividend than buyback. One of the reasons is the practical regulatory limitation that limits the ability to buy shares back quite massively. And on top of that, we have made a commitment to distribute 25% to 50% of net profit as dividend. We want to honor this commitment. And thirdly, we have ambitious growth plans and do not think that we would want to decrease equity base below that.

Yes. Continuing on to earn-out. How do we look on the earn-out timings for the rest of the year? How much are we still expecting in 2027?

Expectation means a little bit of an element of speculation here. I can take a look back, maybe shed a little bit more light on performance of those sold businesses and our contribution in '26. We have collected between EUR 1 million and EUR 1.2 million from earn-outs on a monthly basis. It is actually better than we expected. This also resulted in this EUR 2.2 million revaluation positive contribution. But economically, I think the positive impact not reflected in the P&L, but in cash is even stronger than this EUR 2.2 million, in fact, EUR 6-plus million. And yes, we are supporting the new owners of those businesses where we can and hope that they will continue performing well.