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Multitude SE
Interim / Quarterly Report • Nov 16, 2023
6313_10-q_2023-11-16_c59a57da-f0ff-4478-a83a-8c2704dffaad.pdf
Interim / Quarterly Report
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9M 2023 Report
Contents
| Board of directors' report 9M 2023 | |
|---|---|
| Company structure and business model | 06 |
| SweepBank | 08 |
| Ferratum | 10 |
| CapitalBox | 12 |
| Key figures and ratios | 14 |
| Key developments in 9M 2023 | 16 |
| Unaudited interim consolidated financial statements 9M 2023 | 22 |
| Consolidated statement of profit or loss | 22 |
| Consolidated statement of comprehensive income | 23 |
| Consolidated statement of financial position | 24 |
| Consolidated statement of cash flows | 25 |
| Consolidated statement of changes in equity | 26 |
| Notes to consolidated financial statements | 27 |
Board of Directors' Report 9M 2023 Unaudited
Multitude SE in Brief
Multitude aims to become the most valued financial ecosystem by acting as a growth platform that creates success stories in FinTech. With profound know-how in technology, regulation, funding and cross-selling, Multitude offers a range of sustainable banking and financial services for FinTechs to grow and scale rapidly. Multitude and its three independent business units, SweepBank, Ferratum and CapitalBox, employ approx. 700 people in 16 countries, and they together generated EUR 212 million revenue in 2022. Multitude was founded in 2005 in Finland and is listed in the Prime Standard segment of the Frankfurt Stock Exchange under the symbol "FRU".
OUR CURRENT BUSINESS UNITS
COMPANY FACTS
Founded in Finland in 2005
Headquartered in Helsinki
Full European Banking Licence
Listed in the Frankfurt Stock Exchange
€212m 400,000+ 700+ 16
Group Revenue 2022 Customers Employees Countries
Multitude Group 9M 2023 – Board of Directors' Report 5
Key highlights
9M in Brief
KEY HIGHLIGHTS:
- Strong performance continues: EBIT 50% up to EUR 32.5m and profit 103% up to EUR 12.4m
- Strong cash position remains
- Robust payment behaviour
- Eur 45m EBIT guidance for 2023 remains in place
Company structure and business model
Multitude Group is an international provider of digital financial services. Nordic-born and globally focused with operations in 16 countries, backed by 18+ years of solid track record in building and scaling financial technology, its ambition is to become the most valued financial ecosystem. How is Multitude reaching its ambitious vision?
The leading feature of the Multitude ecosystem is the growth platform, which offers four specific benefits to FinTech businesses.
The benefits of our platform can be divided into four main categories:
- Access to funding, supported by Multitude Bank
- Regulatory and compliance expertise (KYC, AML, anti-fraud, scoring, reporting)
- Technological support (API integration, security)
- Cross-resourcing and selling opportunities
At Multitude, we refer to a platform business as one that offers a suite of business processes and services to help other businesses scale and grow faster than they could on their own. The key to our growth platform thinking is that we can seamlessly deliver robust and reliable services to the customers of it, our business units, and extend these services to other partners.
Currently, the growth platform supports three business units: SweepBank as a shopping and financing app, Ferratum as a consumer lender, and CapitalBox as a business lender. The first external customers were successfully added to the growth platform in Q3 2022 and are currently utilising its funding benefits.
Our platform serves 400,000 customers in 16 countries through its internal customers SweepBank, Ferratum and CapitalBox. These customers have or have had an active loan balance with at least one of the independent business units within Multitude within the past 12 months or are active users of the SweepBank app, or a combination of these.
Business Unit: SweepBank
With full access to the Multitude growth platform and having onboarded its first customers in 2020, SweepBank serves the needs of tech-savvy underserved customers such as young adults, students, economic immigrants, and freelancers by offering a compelling and flexible, fully digitalised combination of shopping and financing services in one intuitive app. SweepBank's main customer segment in consumers represents approx. 35 million potential customers in the EU and the segment is expected to grow further. This segment expects nothing less than a strongly personalised experience in everything they do, including financial services and SweepBank offers exactly that and more.
At the end of 9M 2023, SweepBank offered three products: Prime Loan, Credit Card and Bank Account and operated across three markets, Finland, Germany and Latvia.
Credit card
The SweepBank Credit Card, a Mastercard® without annual or monthly fees, allows financing smaller purchases of up to EUR 8,000. The card offers free liability coverage for purchases with it and an interest-free period of up to 60 days. Virtual card integrations with Apple Pay and NFC payments allow easy usage online and at physical points of sale. Customers onboard the app within minutes and are automatically scored. Upon successful onboarding, the free card is immediately ready to use. Customers can also use the card as a flexible credit facility by withdrawing money from it directly into their bank account, a feature that is growing in popularity among customers.
Prime Loan
Prime Loans, longer-term instalment loans for consumers, enable higher purchases, like home renovations, cars and other more significant purchases. The loans can amount to up to EUR 15,000 with loan maturities ranging between 1-7 years. SweepBank is currently only issuing Prime Loans in Latvia.
Basic Banking & Shopping
SweepBank offers current accounts with up to 1% interest p.a. and fixed-term deposit accounts with up to 4% interest p.a. (max. deposit EUR 100,000) for up to three years. The current account includes a virtual Mastercard® debit card that is instantly ready to use online and in physical stores after successful onboarding to the app. In addition, SweepBank has a loyalty program that allows customers to earn up to 5% loyalty points and get discounted offers when they purchase from selected partners. Customers can convert loyalty points directly into cash in the SweepBank app.
9M 2023 highlights
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The focus during 2023 is to shift towards profitability and continue bringing customers the best of financing and shopping in one app. SweepBank is executing its strategy to accelerate profitable growth by focusing on high-margin products and countries, by growing the Prime Loan business in Latvia and the credit card business in Finland. This is combined with operational and direct cost reductions.
The credit card growth derives from the digital marketing strategy, growing the customer base efficiently by during 9M 2023. A flexible instalment solution (as a part of the credit card) and an initial merchant network have been established during 9M 2023 to further grow within the shopping segment.
The Prime Loan in Latvia had strong revenue growth during 9M 2023, price adjustments were made to meet higher funding costs and retain the high margin. At the end of H1, interest on current & saving accounts and term deposits were increased in Finland and Latvia to start growing a favourable source of funding for H2.
From the financial perspective, SweepBank improved its EBIT results by EUR 3.8 million from EUR -16.3 million in Q1-Q3 2022 to EUR -12.5 million in Q1-Q3 2023. Revenue growth shows an increase of 44.1% in Q1-Q3 2023 as compared to Q1-Q3 2022.
Going forward
Multitude has strategic plans in place to seamlessly integrate SweepBank's shopping and banking app with its other business units, while also focusing on expanding the consumer and SME business segments. Leveraging SweepBank's robust mobile banking platform, Multitude aims to harness cutting-edge technology to not only enhance it's services but also cross-sell effectively and attract new clients. This strategic initiative will pave the way for a more streamlined and customer-centric approach across our entire business ecosystem.
Business Unit: Ferratum
Three services under the Ferratum brand – Micro Loan, Plus Loan and Credit Limit, allow Ferratum to cater to various, immediate financial needs of individuals, such as unplanned, short-term financing needs resulting from unexpected life events. To apply for any of Ferratum's loans, the customer only fills in a handful of data while the in-house developed and automated, AI-powered scoring algorithms handle the rest. This end-to-end digital process enables a finished and scored application within minutes. On average, it takes less than 15 minutes from an approved application for the customer to have the loan amount in their bank account.
Ferratum has three products and operates across 13 markets: Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, Germany, Latvia, The Netherlands, Norway, Romania, Slovenia, and Sweden.
Micro Loan
Micro Loans, so-called bullet loans, serve the need for instant, short-term financing with quick repayment. Micro Loans range from EUR 25 to EUR 1,000, which customers pay back in one instalment within 7-60 days.
Plus Loan
A Plus Loan caters to a customer's higher need for instant finance, with loan amounts ranging from EUR 300 to EUR 4,000 and maturity periods between 2-18 months with equal repayments over the loan term.
Credit Limit
Credit Limit, the most popular service under Ferratum, is a pre-approved credit line, also called revolving credit, which enables financial flexibility on a more continuous basis. Eligible customers are pre-approved for up to EUR 5,000 and can withdraw money and repay without fixed amounts or timelines.
9M 2023 highlights
The further roll-out of Credit Limit, the most popular financing service within Ferratum, together with scaling the most profitable markets, are key growth drivers for 2023. On top of this, Ferratum continues to adjust its risk policy rules to ensure that customers make payments consistently. These changes were also meant to prepare the tribe for potential challenges in the future due to inflation, which might affect certain customer groups.
From the financial perspective, Ferratum increased its EBIT level by 7.8% from EUR 39.7 million in Q1-Q3 2022 to EUR 42.7 million in Q1-Q3 2023. Revenue shows positive 2.8% growth in Q1-Q3 2023 as compared to Q1-Q3 2022.
AI service tools: Staying on top of the fast-changing trends
In today's digital age, customers tend to favor visual content over text-based information. Ferratum recognizes this trend and is at the forefront of innovation by pioneering cutting-edge AI service tools. One notable innovation is an advanced AI video system featuring hyper-realistic human-like avatars that serve as virtual assistants. These tools incorporate predictive services that allow proactive anticipation and addressing of customer needs.
By leveraging these AI service tools, Ferratum enhances customer service while ensuring cost-efficient processes, reducing the need for manual intervention. Ferratum's strategic approach reflects its steadfast commitment to delivering exceptional service and positioning itself as a trailblazer in the dynamic realm of customer support.
Looking ahead, Ferratum aims to expand its popular financing service, Credit Limit, and strategically scale in the most lucrative markets, thereby ensuring sustained excellence in customer engagement through dedication to innovation.
Going forward
Ferratum's strategic focus lies in sustaining growth within its target markets. This will be achieved through the enhancement of digital marketing strategies and customer onboarding processes, alongside improvements in collection and credit risk technology. These efforts are essential to ensure a consistent and stable credit loss performance over time. Additionally, Ferratum plans to innovate further to improve the analysis of user data and search engine interactions.
Business Unit: CapitalBox
Small and medium-sized enterprises (SMEs) make up an impressive 99.8% of businesses in Europe. Nonetheless, they frequently encounter inadequate support or even outright neglect from traditional banking systems. The outdated methods and services offered by traditional banks no longer sync with the dynamic and evolving needs of today's SMEs within the contemporary business landscape.
CapitalBox provides essential financial solutions to SMEs through its credit lines and instalment loans. Through a streamlined, fully digitalised process, funds can be made available to SMEs in a matter of minutes after application approval. This efficiency positions CapitalBox as the perfect ally for meeting short-term business financing requirements. Powered by advanced technology, experience, and the resources of Multitude's growth platform, CapitalBox delivers a swift and dependable offering. As of the end of Q3 2023, CapitalBox had established its presence in five markets: Finland, Sweden, Denmark, Lithuania, and the Netherlands, offering four distinct products.
Instalment Loans
These loans, with amounts reaching up to EUR 350 thousand, serve as investment injections. Spanning a period of 6 to 48 months, these solutions empower SMEs to finance various aspects of their operations. From expansion initiatives to inventory management, and the procurement or leasing of equipment, these loans cater to a wide array of business needs.
Credit Line
CapitalBox extends a flexible credit line to SMEs, accommodating financial needs ranging up to EUR 150 thousand. This adaptable financing option provides SMEs with the financial flexibility required to navigate the dynamic business environment to cover working capital fluctuation.
Secured Loan
With the aim of promoting growth, CapitalBox offers secured loans designed for substantial investments. These loans can reach up to EUR 2.0 million, addressing a gap in the industry where smaller FinTech firms might lack capacity, and traditional banks might opt not to provide secured loans to SMEs.
Purchase Finance
In collaboration with retail partners, CapitalBox makes its financing accessible to business customers at the point of sale. This strategic partnership empowers businesses to acquire essential assets without undue financial strain.
CapitalBox's commitment to SMEs' financial needs, combined with its efficient digital approach and diverse product range, positions it as a pivotal ally in the journey of business growth and success.
9M 2023 highlights
CapitalBox has made significant progress in automating the sales flow for the Swedish and Lithuanian markets, leading to faster client response time for clients and quicker contract signings after applications are approved. CapitalBox has also increased the credit line amount from EUR 100 thousand to EUR 150 thousand in all markets.
In H1, CapitalBox introduced an online Buy Now Pay Later (BNPL) product in the Finnish market, with plans for its scaling in other markets, to adapt to the evolving consumer preferences and its drive for increased revenue streams. In Q3, CapitaBox successfully onboarded a few BNPL partners as well as clients, with interest increasing every month.
From the financial perspective, CapitalBox shows a significant development of its EBIT figure changing from the negative EUR 1.7 million in Q1-Q3 2022 to the positive EUR 2.2 million in Q1-Q3 2023. Consequently, revenue line showed an increase of 11.1% from EUR 15.1 million in Q1-Q3 2022 to EUR 16.8 million in Q1-Q3 2023.
Going forward
CapitalBox continues to expand it's distribution channels further and roll out new products to existing markets. Additionally, the company aims to bring further product innovations to the market and make improvements in scalability. The full automation of underwriting and sales of all loan processes continues to be a focus.
Payment Behavior Improvement
Payment behavior has been stable and proactive actions have been taken to tighten risk appetite for the construction industry across all portfolios arising from increased macro risks.
Automation Enhancement
Automation will play a pivotal role in CapitalBox's customer and partner outreach efforts, increasing reach and accelerating acquisition.
Customer and Employee Satisfaction
CapitalBox's commitment to customer satisfaction is reflected in its strong customer rating of 4.5 out of 5 across all markets on Trustpilot. In conclusion, CapitalBox's customers appreciate the smooth loan application and stages, the personal approach and the speed in response from customer support.
Key figures and ratios
| EUR '000 | Q3 2023 | Q1-Q3 2023 |
Restated Q3 2022 |
Restated Q1-Q3 2022 |
|---|---|---|---|---|
| Revenue | 57,866 | 167,393 | 54,004 | 157,573 |
| Profit before interests and taxes ("EBIT") | 11,562 | 32,470 | 9,085 | 21,679 |
| Profit before tax | 5,805 | 15,151 | 4,875 | 7,894 |
| Profit before tax margin, in % | 10.0 | 9.1 | 9.0 | 5.0 |
| Net cash flows from (used in) operating activities before movements in loan portfolio and deposits received |
44,161 | 115,162 | (4,116) | 41,286 |
| Net cash flows used in operating activities | (5,937) | (259) | (15,219) | (42,127) |
| Net cash flows used in investing activities | (178) | (18,879) | (5,107) | (23,857) |
| Net cash flows from (used in) financing activities | (23,357) | 34,232 | 24,547 | (79,730) |
| Net increase (decrease) in cash and cash equivalents | (29,473) | 15,094 | 4,221 | (145,714) |
| EUR '000 | 30 Sep 2023 | 31 Dec 2022 |
|---|---|---|
| Loans to customers | 548,239 | 509,463 |
| Impaired loan coverage ratio, in % | 17.8 | 17.8 |
| Deposits from customers | 547,668 | 501,734 |
| Cash and cash equivalents | 167,040 | 153,325 |
| Total assets | 819,534 | 755,228 |
| Non-current liabilities | 244,170 | 132,462 |
| Current liabilities | 390,996 | 440,807 |
| Interest-bearing liabilities, excluding deposits from customers | 52,461 | 51,358 |
| Total equity | 184,368 | 181,959 |
| Equity ratio, in % | 22.5 | 24.1 |
| Net equity ratio, in % | 28.7 | 30.6 |
| Net debt to equity ratio | 2.54 | 2.31 |
| Calculation of key financial ratios | |||||
|---|---|---|---|---|---|
| 100x | Profit before tax | ||||
| Profit before tax (%) = | Revenue | ||||
| Impaired Loan coverage ratio (%) = | 100x | Credit loss allowance | |||
| Gross loans to customers | |||||
| 100x | Total equity | ||||
| Equity ratio (%) = | Total assets | ||||
| 100x | Total equity | ||||
| Net equity ratio (%) = | Total assets – cash and cash equivalents | ||||
| Total liabilities – cash and cash equivalents | |||||
| Net debt to equity ratio = | Total equity | ||||
Key developments in 9M 2023
Financial overview
Improved presentation of financial statement line items
The Group has improved its presentation of certain financial items on the consolidated financial statements at the end of 2022. As a result, the Group's consolidated statement of financial position, consolidated statements of profit or loss, total comprehensive income, and cash flows, including relevant note disclosures for the comparative period of Q1-Q3 2022, have been restated to reflect the impact of the presentation adjustments. The adjustment pertains to brokerage fees on loans and deposits and the classification of loans to customers in the consolidated statement of financial position and deposits to customers in the consolidated statement of cash flows.
Stable portfolio size and solid portfolio quality
The Group's total loans to customers stood at EUR 548.2 million at the end of Q3 2023 – an increase from EUR 509.5 million (+7.6%) at the end of Q4 2022. Despite the EUR 3.6 million (+6.2%) increase in impairment on loans to customers when comparing Q1-Q3 2023 and Q1-Q3 2022, the Group's impaired loan coverage ratio ("ILCR") remains stable (17.8% at the end of 2022 and 17.8% at the end of Q3 2023).
Warehouse lending and non-current financial assets
In the second half of 2022, Multitude expanded its business activity to include investments in securitized bonds and mezzanine investments. These investments are now recorded as other non-current financial assets under the SweepBank business unit. Equity part of the mezzanine investment is shown as investments accounted for using the equity method in the consolidated statement of financial position. At the end of Q3 2023, the value of these assets grew significantly to EUR 43.4 million, up by EUR 14.5 million (+50.1%) from EUR 28.9 million at the end of 2022. This growth is attributed to the attraction of new partners and the draw-down of the bond facility by the existing ones.
Continuous optimisation of operating expenses
To fulfill its guidance, the Group introduced an effective cost management system and approval process. It continues to show a significant decline in general and administrative expense by EUR 2.7 million (-13.8%) when comparing Q1-Q3 2023 to Q1-Q3 2022 (Q1-Q3 2023: EUR 16.7 million, Q1-Q3 2022: EUR 19.4 million). Bank and lending costs were also reduced significantly by EUR 1.6 million (-15.4%) over the reported period (Q1-Q3 2023: EUR 8.9 million, Q1-Q3 2022: EUR 10.5 million). Personnel expense is stable with a small decrease by EUR 0.7 million (-2.6%) (Q1-Q3 2023: EUR 25.2 million, Q1-Q3 2022: EUR 25.9 million). Depreciation and amortisation decreased by EUR
1.1 million (-9.0%) (Q1-Q3 2023: EUR 11.5 million, Q1-Q3 2022: EUR 12.6 million) due to a reduction in the depreciation base of internally generated software. The recent offline media campaign has resulted in an increase in selling and marketing expense by EUR 1.0 million (10.9%) as compared to the same period last year (Q1-Q3 2023: EUR 10.8 million, Q1-Q3 2022: EUR 9.8 million).
General increase in interest rates
The surge in interest rates across European economies during Q1-Q3 2023 has had significant impact on net finance costs. In Q1-Q3 2023, net finance costs increased by EUR 3.6 million (+25.9%) compared to the same period last year, reaching EUR 17.4 million. Out of the EUR 3.6 million cost increase, EUR 0.7 million is attributed to foreign exchange losses including the cost of hedging.
This rise in foreign exchange hedging costs is directly attributed to the heightened interest rates prevalent in European economies throughout Q1-Q3 2023. It is worth noting that the financial landscape of Q1-Q3 2022 was unique, with exceptionally low finance costs. During that period, foreign exchange gains from the remaining open monetary positions surpassed the hedging costs, resulting in a positive net impact in Q1-Q3 2022.
Furthermore, Multitude showed a notable increase of EUR 3.8 million (+36.3%) in interest expenses during the reporting period. This increase stems from the issuing of a new bond in Multitude SE in December 2022, heightened by the prevailing trend of rising interest rates. On the other hand, the Group was able to leverage the increased liquidity level and higher interest rates to earn an additional EUR 1.1 million of interest income on short-term deposits (Q1-Q3 2023: EUR 1.4 million, Q1-Q3 2022: EUR 0.3 million).
Steady performance
In Q1-Q3 2023, the Group's operations demonstrated strong profitability across key indicators. The profit before interest and taxes ("EBIT") reached EUR 32.5 million, complemented by a profit before taxes of EUR 15.2 million and an after-tax profit of EUR 12.4 million. Comparatively, in Q1-Q3 2022, the figures were lower: EUR 21.7 million for EBIT, EUR 7.9 million for profit before taxes, and EUR 6.1 million for after-tax profit.
This favorable outcome can be attributed to the strategic cost restructuring undertaken by management and continuous growth of the main products in Q1-Q3 2022. Consequently, the Group witnessed a noteworthy year-over-year EBIT increase that translated into an enhanced EBIT margin, rising from 13.8% in Q1-Q3 2022 to 19.4% in Q1-Q3 2023.
The Group's shareholders' equity remained relatively steady, experiencing a minor increase of EUR 2.4 million (+1.3%). It increased from EUR 182.0 million at the close of Q4 2022 to EUR 184.4 million by the end of Q3 2023.
Highly liquid asset position
The Group's liquidity position has strengthened significantly. As of the end of Q3 2023, the total assets reached EUR 819.5 million, marking a substantial increase of EUR 64.3 million (8.5%) compared to EUR 755.2 million recorded at the close of Q4 2022.
At the end of Q3 2023, the Group's current assets tallied up to EUR 619.7 million. The ratio of current assets to total assets remains notably high at 75.6%, representing a rise of EUR 43.3 million (+7.5%) compared to EUR 576.3 million and a corresponding ratio of 76.3% seen at the end of Q4 2022. This surge is primarily attributed to the net growth in cash and cash equivalents and current loans to customers.
Cash and cash equivalents grew by EUR 13.7 million (+8.9%) from EUR 153.3 million at the end of Q4 2022 to EUR 167.0 million at the end of Q3 2023. Additionally, the Group's non-current assets also experienced growth, expanding by EUR 20.9 million from EUR 178.9 million as of the end of Q4 2022 to EUR 199.8 million by the end of Q3 2023.
Shift to non-current deposit base
The Group's strategy revolved around strengthening its cash liquidity, mainly from an emphasis on non-current deposits. Consequently, the overall customer deposits surged from EUR 501.7 million at the end of Q4 2022 to EUR 547.7 million at the end of Q3 2023, translating to a substantial growth of EUR 45.9 million or 9.2%. The proportion of non-current deposits saw significant growth, escalating from 16.3% at the end of 2022 to 35.1% by the end of Q3 2023. The growth in deposits influenced the equity ratio, which decreased by 1.6 percentage points from 24.1% at the end of Q4 2022 to 22.5% at the end of Q3 2023. Concurrently, total liabilities witnessed an expansion of EUR 61.9 million (+10.8%), transitioning from EUR 573.3 million at the end of Q4 2022 to EUR 635.2 million at the end of Q3 2023.
This surge in liabilities can be attributed to a significant influx of new non-current deposits, marking an 135.5% increase from EUR 81.6 million in late 2022 to EUR 192.2 million by the end of Q3 2023. Consequently, the Group's net debt-to-equity ratio experienced a slight uptick, moving from 2.31 at the close of Q4 2022 to 2.54 by the end of Q3 2023. Among the Group's total liabilities, EUR 391.0 million were classified as current by the end of Q3 2023 (a decrease of EUR 49.8 million or 11.3% from Q4 2022). This contributed to a decline in the current liabilities over total liabilities ratio, which decreased from 76.9% at the conclusion of Q4 2022 to 61.6% by the end of Q3 2023.
Treasury update
By the end of Q3 2023, Multitude's cash position stood at EUR 167.0 million. Out of this amount a significant portion is invested in short-term deposits with reputable banks, hereby generating additional interest income.
Notably, the Multitude Bank has a highly diversified depositor base, with 99% of its deposits originating from customers covered by the Depositor Compensation Scheme. Despite a significant rise in general interest rates over the past 9 months, Multitude's diverse funding base supported the limited impact on the Group's funding costs.
On 24 August 2023, Fitch Ratings has assigned Multitude Bank Plc Long-Term Issuer Default Rating (IDR) of 'B+' and Short-Term IDR of 'B' The outlook on the Long-Term Issuer Default Rating is stable.
During Q3 2023, the Group bought back a portion of the Group's perpetual bond for an additional amount of EUR 1.5 million, with the cummulative repayment of EUR 3.5 million during the year, this position equals now to EUR 46.5 million.
Personnel update
The average number of employees in 9M 2023 is equal to 683 HC (9M 2022 – 690 HC) with related personnel expense amounting to EUR 25.2 million ( 9M 2022 – EUR 25.9 million).
There are no changes in the Group's Leadership Team or the Board during Q3 2023.
Risk factors and risk management
Multitude carefully takes calculated risks in its business operations to minimise unexpected losses and protect the reputation of the Group. This prudent risk management approach can ultimately increase profitability and shareholder value. The leadership team and tribe management regularly oversee operations. They are ultimately responsible for managing risks and ensuring the Group can access the necessary software and instructions for controlling and monitoring risks. Each leadership team member ultimately bears responsibility for identifying and managing the risks related to their functions in line with instructions from the Board. Multitude is proactive in complying with all legal regulations and closely monitors any changes that might occur in the countries where it operates. The Group categorises its risk exposures into three main areas:
- Credit risks (such as receivables from customers)
- Market risks (including foreign exchange risks, liquidity risk, interest rate risks, and other price risks)
- Operational risks (such as IT risks, legal and regulatory risks, and other operational risks)
By systematically addressing these risk factors, Multitude proactively safeguards its operations, sustains compliance with regulations, and ensures the sustained pursuit of long-term profitability and shareholder value.
Unaudited Interim Consolidated Financial Statements 9M 2023
Consolidated statement of profit or loss
| EUR '000 | Notes | Q3 2023 |
Q1-Q3 2023 |
Restated Q3 2022 |
Restated Q1-Q3 2022 |
|---|---|---|---|---|---|
| Interest revenue | 5 | 57,189 | 165,222 | 53,128 | 155,076 |
| Servicing fee revenue | 5 | 676 | 2,171 | 877 | 2,497 |
| Total revenue | 57,866 | 167,393 | 54,004 | 157,573 | |
| Operating expenses: | |||||
| Impairment loss on loans to customers | 6 | (21,255) | (61,452) | (20,118) | (57,872) |
| Bank and lending costs | (2,953) | (8,913) | (3,681) | (10,535) | |
| Personnel expense | 7 | (8,405) | (25,197) | (7,918) | (25,860) |
| Selling and marketing expense | (3,777) | (10,821) | (2,996) | (9,755) | |
| General and administrative expense | (5,517) | (16,708) | (5,835) | (19,384) | |
| Depreciation and amortisation | (3,908) | (11,497) | (4,569) | (12,640) | |
| Operating profit | 12,052 | 32,805 | 8,887 | 21,528 | |
| Other income | 8 | 1 | 2 | 198 | 151 |
| Other expense | 8 | (491) | (337) | - | - |
| Profit before interests and taxes ("EBIT") | 11,562 | 32,470 | 9,085 | 21,679 | |
| Finance income | 9 | 657 | 1,428 | 60 | 286 |
| Finance costs | 9 | (6,435) | (18,781) | (4,270) | (14,070) |
| Share of result in associated companies | 22 | 34 | - | - | |
| Profit before income taxes | 5,805 | 15,151 | 4,875 | 7,894 | |
| Income tax expense | 10 | (930) | (2,796) | (910) | (1,798) |
| Profit for the period | 4,875 | 12,355 | 3,967 | 6,097 | |
| Earnings per share: | 11 | ||||
| Weighted average number of ordinary shares in issue | 21,578 | 21,578 | 21,578 | 21,578 | |
| Total adjusted earnings per share, EUR | 0.14 | 0.37 | 0.14 | 0.17 |
Consolidated statement of comprehensive income
| EUR '000 | Q3 2023 |
Q1-Q3 2023 |
Restated Q3 2022 |
Restated Q1-Q3 2022 |
|---|---|---|---|---|
| Profit for the period | 4,874 | 12,355 | 3,967 | 6,097 |
| Other comprehensive income (expense): | ||||
| Items that may be reclassified to profit or loss: | ||||
| Currency translation difference | 1,157 | 56 | 122 | (595) |
| Total other comprehensive income (loss) | 1,157 | 56 | 122 | (595) |
| Total comprehensive income for the period | 6,032 | 12,412 | 4,089 | 5,502 |
Consolidated statement of financial position
| EUR '000 | Notes | 30 September 2023 |
31 December 2022 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets: | |||
| Property, plant and equipment | 2,866 | 3,081 | |
| Right-of-use assets | 5,321 | 4,613 | |
| Intangible assets | 29,702 | 31,400 | |
| Deferred tax assets | 6,348 | 7,179 | |
| Loans to customers | 6, 12 | 111,193 | 103,727 |
| Other non-current financial assets | 12 | 43,368 | 28,883 |
| Investments accounted for using the equity method | 1,050 | - | |
| Total non-current assets | 199,848 | 178,883 | |
| Current assets: | |||
| Loans to customers | 6, 12 | 437,046 | 405,736 |
| Other current financial assets | 12 | 11,604 | 10,326 |
| Derivative financial assets | 12 | 603 | 3,180 |
| Current tax assets | 1,916 | 2,230 | |
| Prepaid expenses and other current assets | 1,477 | 1,549 | |
| Cash and cash equivalents | 12 | 167,040 | 153,325 |
| Total current assets | 619,686 | 576,345 | |
| Total assets | 819,534 | 755,228 | |
| EQUITY AND LIABILITIES | |||
| Equity: | |||
| Share capital | 40,134 | 40,134 | |
| Treasury shares | (97) | (142) | |
| Retained earnings | 82,798 | 77,679 | |
| Perpetual bonds | 46,500 | 50,000 | |
| Unrestricted equity reserve | 14,708 | 14,708 | |
| Translation differences | (2,297) | (3,049) | |
| Other reserves | 2,622 | 2,631 | |
| Total equity | 184,368 | 181,960 | |
| LIABILITIES | |||
| Non-current liabilities: | |||
| Long-term borrowings | 12 | 47,165 | 46,791 |
| Deposits from customers | 12 | 192,164 | 81,610 |
| Lease liabilities | 12 | 3,353 | 3,095 |
| Deferred tax liabilities | 1,488 | 966 | |
| Total non-current liabilities | 244,170 | 132,462 | |
| Current liabilities: | |||
| Deposits from customers | 12 | 355,504 | 420,124 |
| Derivative financial liabilities | 12 | 2,203 | 446 |
| Lease liabilities | 12 | 1,942 | 1,472 |
| Current tax liabilities | 1,135 | 921 | |
| Trade payables | 12 | 10,615 | 6,314 |
| Accruals and other current liabilities | 12 | 19,597 | 11,531 |
| Total current liabilities | 390,996 | 440,807 | |
| Total liabilities | 635,167 | 573,269 | |
| Total equity and liabilities | 819,534 | 755,228 |
Consolidated statement of cash flows
| EUR '000 | Notes | Q3 2023 |
Q1-Q3 2023 |
Restated Q3 2022 |
Restated Q1-Q3 2022 |
|---|---|---|---|---|---|
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||
| Profit for the year | 4,874 | 12,356 | 3,966 | 6,096 | |
| Adjustments for: Depreciation, amortisation and impairment of |
4,411 | 11,582 | 4,557 | 12,617 | |
| non-financial assets Finance costs, net |
9 | 5,821 | 16,435 | 4,106 | 13,074 |
| Tax on income | 10 | 627 | 2,492 | 902 | 1,776 |
| Other adjustments | (357) | 347 | (57) | 223 | |
| Impairment on loans to customers | 6 | 21,255 | 61,452 | 19,765 | 57,872 |
| Working capital changes: | |||||
| Increase (-) / decrease (+) in current receivables | 11,514 | 20,805 | (27,703) | (30,568) | |
| Decrease (-) in trade payables and other liabilities |
(746) | (3,034) | (6,034) | (6,658) | |
| Interest paid | (3,542) | (7,545) | (2,586) | (9,337) | |
| Interest received | 363 | 819 | 474 | 662 | |
| Income taxes paid | (60) | (547) | (1,505) | (4,471) | |
| Net cash flows from (used in) operating activities before movements in loan portfolio and deposits |
44,161 | 115,162 | (4,116) | 41,286 | |
| Movements in gross loans to customers | 6 | (50,098) | (115,421) | (11,103) | (83,413) |
| Net cash flows used in operating activities | (5,937) | (259) | (15,219) | (42,127) | |
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||
| Purchase of tangible and intangible assets | (3,173) | (8,036) | (3,304) | (9,170) | |
| Purchase of investments and other assets | - | - | (1,803) | (4,686) | |
| Proceeds from sale of investments and other assets | 4,795 | 4,774 | - | - | |
| Purchase of non-current financial investments | (1,800) | (14,600) | - | (10,000) | |
| Purchase of investments accounted for using the equity method |
- | (1,016) | - | - | |
| Net cash flows used in investing activities | (178) | (18,879) | (5,107) | (23,856) | |
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||
| Dividends paid / distribution of equity reserve | (2) | (2,591) | - | - | |
| Perpetual bond repayment | (1,390) | (3,265) | - | - | |
| Perpetual bond interests and expenses | (1,581) | (4,426) | (549) | (2,403) | |
| Repayment of finance lease liabilities | (698) | (1,802) | (761) | (1,881) | |
| Proceeds from long-term borrowings | - | - | - | 39,400 | |
| Proceeds from short-term borrowings | - | - | 5 | 2,770 | |
| Repayment of short-term borrowings | - | - | (1,700) | (85,221) | |
| Movements in deposits from customers | (19,686) | 46,316 | 27,552 | (32,395) | |
| Net cash flows from (used in) financing activities | (23,357) | 34,232 | 24,547 | (79,730) | |
| Cash and cash equivalents, at the beginning of the period |
12 | 196,707 | 153,326 | 149,065 | 301,592 |
| Exchange losses on cash and cash equivalents | 9 | (194) | (1,380) | (1,066) | (3,658) |
| Net increase (decrease) in cash and cash equivalents | (29,473) | 15,094 | 4,221 | (145,714) | |
| Cash and cash equivalents, at the end of the period | 12 | 167,040 | 167,040 | 152,220 | 152,220 |
Consolidated statement of changes in equity
| EUR '000 | Share capital |
Treasury shares |
Retained earnings |
Perpetual bonds |
Unrestricted equity reserve |
Translation differences |
Other reserves |
Total equity |
|---|---|---|---|---|---|---|---|---|
| At 1 January 2022 | 40,134 | (142) | 70,466 | 50,000 | 14,708 | (2,995) | 2,631 | 174,802 |
| Comprehensive income | ||||||||
| Profit or loss for the period | - | - | 6,097 | - | - | - | - | 6,097 |
| Currency translation difference | - | - | (476) | - | - | (118) | (1) | (595) |
| Total comprehensive income | - | - | 5,621 | - | - | (118) | (1) | 5,502 |
| Transactions with owners | ||||||||
| Perpetual bonds interests and issuance costs |
- | - | (2,403) | - | - | - | - | (2,403) |
| Share-based payments | - | - | 347 | - | - | - | - | 347 |
| Other changes | - | - | (706) | - | - | 1 | - | (705) |
| Total transactions with owners | - | - | (2,762) | - | - | 1 | - | (2,761) |
| Restated at 30 September 2022 |
40,134 | (142) | 73,326 | 50,000 | 14,708 | (3,113) | 2,630 | 77,543 |
| At 1 January 2022 | 40,134 | (142) | 70,466 | 50,000 | 14,708 | (2,995) | 2,631 | 174,802 |
| Comprehensive income | ||||||||
| Profit or loss for the period | - | - | 11,995 | - | - | - | - | 11,995 |
| Currency translation difference | - | - | (891) | - | - | (9) | - | (900) |
| Total comprehensive income | - | - | 11,104 | - | - | (9) | - | 11,095 |
| Transactions with owners | ||||||||
| Perpetual bonds interests and issuance costs |
- | - | (3,670) | - | - | - | - | (3,670) |
| Share-based payments | - | - | 483 | - | - | - | - | 483 |
| Other changes | - | - | (704) | - | - | (44) | - | (748) |
| Total transactions with owners | - | - | (3,891) | - | - | (44) | - | (3,935) |
| At 31 December 2022 | 40,134 | (142) | 77,679 | 50,000 | 14,708 | (3,049) | 2,631 | 181,960 |
| At 1 January 2023 | 40,134 | (142) | 77,679 | 50,000 | 14,708 | (3,049) | 2,631 | 181,960 |
| Comprehensive income | ||||||||
| Profit or loss for the period | - | - | 12,356 | - | - | - | - | 12,356 |
| Currency translation difference | - | - | (695) | - | - | 751 | - | 56 |
| Total comprehensive income | - | - | 11,660 | - | - | 751 | - | 12,412 |
| Transactions with owners | ||||||||
| Dividend distribution Perpetual bonds interests |
- | - | (2,591) | - | - | - | - | (2,591) |
| and issuance costs | - | - | (4,281) | - | - | - | - | (4,281) |
| Perpetual bonds repayment | - | - | - | (3,500) | - | - | - | (3,500) |
| Share-based payments | - | 46 | 331 | - | - | - | - | 377 |
| Other changes | - | - | - | - | - | - | (9) | (10) |
| Total transactions with owners | - | 46 | (6,541) | (3,500) | - | - | (9) | (10,005) |
| At 30 September 2023 | 40,134 | (97) | 82,798 | 46,500 | 14,708 | (2,297) | 2,622 | 184,366 |
1. GENERAL INFORMATION
Multitude SE and its subsidiaries ("Multitude" or the "Group"), is a leading FinTech company that aims to transcend the hassle of physical banking and manual financial transactions through a financial ecosystem. This ecosystem comprises mobile and digital platforms to promote a paperless, borderless, and real-time banking experience, to end customers and small and medium enterprises ("SMEs"). The parent company Multitude SE (business identity code 1950969-1) was established in 2005 and is headquartered at Ratamestarinkatu 11 A, FI-00520 Helsinki. Multitude SE is listed in the Prime Standard of Frankfurt Stock Exchange under the symbol "FRU". The Group also owns Multitude Bank p.l.c., licensed by the Malta Financial Services Authority ("MFSA"), which is a significant part of the Group that allows it to provide financial services and products to European Economic Area ("EEA") member states.
1.1 Significant changes in the current reporting period
There are no significant events during Q3 2023.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation
The Group's unaudited interim consolidated financial statements and accompanying notes have been prepared in accordance with IAS 34, Interim Financial Reporting. The interim consolidated financial statements should be read in conjunction with the Group's audited consolidated financial statements at and for the year ended 31 December 2022, prepared in accordance with IFRS as published by the IASB and adopted by the EU. The interim consolidated financial statements follow the same accounting policies, computation methods, and judgment applications as the 2022 and 2023 Group consolidated financial statements. The only exception is the Sortter acquisition, which was treated as an investment in associates. Furthermore, the Group's revenue and earnings before interests and taxes ("EBIT") are not subject to seasonal or cyclical fluctuations within the financial year.
The Group's interim consolidated financial statements have been authorised for issue by Multitude's Board of Directors on 15 November 2023.
2.2 New and amended standards and interpretations
This paragraph provides a summary of (a) new standards and amendments that are effective for the first time for periods commencing on or after 1 January 2023 (i.e. years ending 31 December 2023), (b) a list of IFRS IC agenda decisions for consideration and (c) forthcoming requirements, being standards and amendments that will become effective on or after 1 January 2024.
The following standards and interpretations apply for the first time to financial reporting periods commencing on or after 1 January 2023:
| Title | Key requirements | Effective date * |
|---|---|---|
| IFRS 17 Insurance Contracts |
IFRS 17 was issued in May 2017 as replacement for IFRS 4 In surance Contracts. It requires a current measurement model where estimates are remeasured in each reporting period. Contracts are measured using the building blocks of: - dis counted probability-weighted cash flows - an explicit risk ad justment, and - a contractual service margin (CSM) represent ing the unearned profit of the contract which is recognised as revenue over the coverage period. The standard allows a choice between recognising changes in discount rates either in the statement of profit or loss or directly in other compre hensive income. The choice is likely to reflect how insurers ac count for their financial assets under IFRS 9. An optional, sim plified premium allocation approach is permitted for the liability for the remaining coverage for short-duration con tracts, which are often written by non-life insurers. There is a modification of the general measurement model called the "variable fee approach" for certain contracts written by life insurers where policyholders share in the returns from under lying items. When applying the variable fee approach, the en tity's share of the fair value changes of the underlying items is included in the CSM. The results of insurers using this model are therefore likely to be less volatile than under the general model. The new rules will affect the financial statements and key performance indicators of all entities that issue insurance contracts or investment contracts with discretionary partici pation features. Targeted amendments made in July 2020 aimed to ease the implementation of the standard by reducing implementation costs and making it easier for entities to ex plain the results from applying IFRS 17 to investors and others. The amendments also deferred the application date of IFRS 17 to 1 January 2023. |
1 January 2023 (deferred from 1 January 2021) |
| Further amendments made in December 2021 added a transi tion option that permits an entity to apply an optional classifi cation overlay in the comparative period(s) presented on ini tial application of IFRS 17. The classification overlay applies to all financial assets, including those held in respect of activities not connected to contracts within the scope of IFRS 17. It al lows those assets to be classified in the comparative period(s) in a way that aligns with how the entity expects those assets to be classified on initial application of IFRS 9. The classifica tion can be applied on an instrument-by-instrument basis |
||
| Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2 |
The IASB amended IAS 1 to require entities to disclose their material rather than their significant accounting policies. The amendments define what is "material accounting policy infor mation" and explain how to identify when accounting policy information is material. They further clarify that immaterial ac counting policy information does not need to be disclosed. If it is disclosed, it should not obscure material accounting infor mation. To support this amendment, the IASB also amended IFRS Practice Statement 2 Making Materiality Judgements to provide guidance on how to apply the concept of materiality to accounting policy disclosures. |
1 January 2023 |
| Definition of Accounting Estimates – Amendments to IAS 8 |
The amendment to IAS 8 Accounting Policies, Changes in Ac counting Estimates and Errors clarifies how companies should distinguish changes in accounting policies from changes in ac counting estimates. The distinction is important, because changes in accounting estimates are applied prospectively to future transactions and other future events, whereas changes in accounting policies are generally applied retrospectively to past transactions and other past events as well as the current period. |
1 January 2023 |
|---|---|---|
| Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12 |
The amendments to IAS 12 Income Taxes require companies to recognise deferred tax on transactions that, on initial recogni tion, give rise to equal amounts of taxable and deductible temporary differences. They will typically apply to transac tions such as leases of lessees and decommissioning obliga tions, and will require the recognition of additional deferred tax assets and liabilities. The amendment should be applied to transactions that occur on or after the beginning of the earli est comparative period presented. In addition, entities should recognise deferred tax assets (to the extent that it is probable that they can be utilised) and deferred tax liabilities at the be ginning of the earliest comparative period for all deductible and taxable temporary differences associated with: - right-of use assets and lease liabilities, and - decommissioning, resto ration and similar liabilities, and the corresponding amounts recognised as part of the cost of the related assets. The cumu lative effect of recognising these adjustments is recognised in retained earnings, or another component of equity, as appro priate. IAS 12 did not previously address how to account for the tax effects of on balance sheet leases and similar transac tions and various approaches were considered acceptable. Some entities may have already accounted for such transac tions consistent with the new requirements. These entities will not be affected by the amendments. |
1 January 2023 |
* Applicable to reporting periods commencing on or after the given date
(b) IFRS IC agenda decisions issued in the last 12 months
At 28 February 2023, the following agenda decisions were issued that may be relevant for the preparation of annual and interim reports in 2023. The date issued refers to the date of approval by the IASB as per the IASB's website.
| Date issued | Topic |
|---|---|
| April 2022 | Demand Deposits with Restrictions on Use arising from a Contract with a Third Party (IAS 7) |
| May 2022 | Principal versus Agent: Software Reseller (IFRS 15) |
| July 2022 | Negative Low Emission Vehicle Credits (IAS 37) |
| July 2022 | Special Purpose Acquisition Companies: Classification of Public Shares as Financial Liabilities or Equity (IAS 32) |
| July 2022 | Transfer of Insurance Coverage under a Group of Annuity Contracts (IFRS 17) |
| October 2022 | Special Purpose Acquisition Companies (SPAC): Accounting for Warrants at Acquisition |
| October 2022 | Lessor Forgiveness of Lease Payments (IFRS 9 and IFRS 16) |
| October 2022 | Multi-currency groups of insurance contracts (IFRS 17 and IAS 21) |
(c) Forthcoming requirements
At 28 February 2023, the following standards and interpretations had been issued but were not mandatory for annual reporting periods ending on 31 December 2023.
| Title | Key requirements | Effective date * |
|---|---|---|
| Non-current liabilities with covenants – Amendments to IAS 1 |
Amendments made to IAS 1 Presentation of Financial Statements in 2020 clarified that liabilities are classified as either current or non-cur rent, depending on the rights that exist at the end of the reporting pe riod. Classification is unaffected by the entity's expectations or events after the reporting date (e.g. the receipt of a waiver or a breach of cov enant). The amendments also clarified what IAS 1 means when it refers to the 'settlement' of a liability. The amendments were due to be ap plied from 1 January 2022. However, the effective date was subse quently deferred to 1 January 2023 and then further to 1 January 2024. In October 2022, the IASB made further amendments to IAS 1 in re sponse to concerns raised about these changes to the classification of liabilities as current or non-current. The new amendments clarify that covenants of loan arrangements will not affect classification of a liabil ity as current or non-current at the reporting date if the entity must only comply with the covenants after the reporting date. However, if the entity must comply with a covenant either before or at the report ing date, this will affect the classification as current or non-current, even if the covenant is only tested for compliance after the reporting date. The amendments require disclosures if an entity classifies a liabil ity as noncurrent and that liability is subject to covenants that the enti ty must comply with within 12 months of the reporting date. The disclo sures include: - the carrying amount of the liability - information about the covenants, and - facts and circumstances, if any, that indicate that the entity may have difficulty complying with the covenants. The amendments must be applied retrospectively in accordance with the normal requirements in IAS 8 Accounting Policies, Changes in Account ing Estimates and Errors. Special transitional rules apply if an entity had early adopted the 2020 amendments regarding the classification of li abilities as current or noncurrent. |
1 January 2024 |
| Lease liability in sale and leaseback – amendments to IFRS 16 |
In September 2022, the IASB finalised narrow-scope amendments to the requirements for sale and leaseback transactions in IFRS 16 Leases which explain how an entity accounts for a sale and leaseback after the date of the transaction. The amendments specify that, in measuring the lease liability subsequent to the sale and leaseback, the seller-lessee determines 'lease payments' and 'revised lease payments' in a way that does not result in the seller-lessee recognising any amount of the gain or loss that relates to the right of use that it retains. This could particularly impact sale and leaseback transactions where the lease payments include variable payments that do not depend on an index or a rate. |
1 January 2024 |
| Sale or contribution of assets between an investor and its associate or joint venture – Amendments to IFRS 10 and IAS 28 |
The IASB has made limited scope amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures. The amendments clarify the accounting treatment for sales or contribution of assets between an investor and their associates or joint ventures. They confirm that the accounting treatment depends on whether the non-monetary assets sold or contributed to an associate or joint venture constitute a 'business' (as defined in IFRS 3 Business Combinations). Where the non-monetary assets constitute a business, the investor will recognise the full gain or loss on the sale or contribu tion of assets. If the assets do not meet the definition of a business, the gain or loss is recognised by the investor only to the extent of the other investor's interests in the associate or joint venture. The amendments apply prospectively. *** In December 2015, the IASB decided to defer the application date of this amendment until such time as the IASB has finalised its research project on the equity method. |
n/a *** |
* Applicable to reporting periods commencing on or after the given date
3. Changes in Group companies
There were the following changes to the Group's companies during Q3:
During Q3, the Group's companies underwent some changes. Specifically, on 24 August 2023, Capital Box GmbH was merged with Pactum Collections GmbH in accordance with the merger agreement between the two companies.
4. Segment information
Multitude has three independent business units, SweepBank, Ferratum and CapitalBox. Each business unit has a CEO that in coordination with the rest of the Leadership Team assumes the role of "Chief Operating Decision Maker" within the definition described in IFRS 8. The function of the "Segment Manager" within the meaning of IFRS 8 is performed by the CEO of the business unit in coordination with Multitude's finance department.
SweepBank
SweepBank simplifies and personalises shopping and financing for young, tech-savvy adults and other underserved segments into one user-friendly app. At the end of Q3 2023, SweepBank offered three products: Prime Loan, Credit Card and Bank Account and operated actively across three markets, Finland, Germany and Latvia. SweepBank's offering is serviced solely through Multitude Bank p.l.c. Multitude also aggregates the transactions arising from its debt investments in the SweepBank segment.
The SweepBank Credit Card, a Mastercard® without annual or monthly fees, allows financing smaller purchases of up to EUR 8,000. The card offers free liability coverage for purchases with it and up to 60 days interest-free period. Customers can also use the card as a flexible credit facility by withdrawing money from it directly into their bank account, a feature that is growing in popularity among customers.
Prime Loans, longer-term instalment loans for consumers, enable higher purchases, like home renovations, cars and other more significant purchases. The loans can amount to up to EUR 15,000 with loan maturities ranging between 1-7 years. SweepBank offers current accounts with up to 1% interest p.a. and fixed-term deposit accounts with up to 4% interest p.a. (max. deposit EUR 100,000) for up to three years.
Ferratum
Ferratum offers digital loans for the daily needs of individuals, such as unplanned, short-term financing needs resulting from unexpected life events. By the end of Q3 2023, Ferratum offered three distinct products: Credit Limit, Plus Loan, and Micro Loans. The company's operations spanned across 13 markets: Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, Germany, Latvia, The Netherlands, Norway, Romania, Slovenia, and Sweden. Ferratum's services are provided via Multitude Bank p.l.c. and other group entities, with 75% of revenue attributed to Multitude Bank p.l.c.
Ferratum's standout offering, the Credit Limit, is a pre-approved credit line that's often referred to as revolving credit. This unique service delivers enhanced financial flexibility on an ongoing basis. Eligible customers are granted pre-approval for amounts up to EUR 5,000. They have the freedom to withdraw funds and repay them without being tied to fixed sums or strict timelines.
For those seeking immediate financial solutions, the Plus Loan steps in. Designed to address higher financial needs, this service provides loan amounts ranging from EUR 300 to EUR 4,000. Customers can choose repayment periods spanning 2 to 18 months, with repayments spread evenly over the loan duration.
For quick and short-term financing, Micro Loans, also known as bullet loans, meets the need for instant financial relief. These loans range from EUR 25 to EUR 1,000 with customers settling the entire loan amount in a single installment within 7 to 60 days.
CapitalBox
CapitalBox provides financing solutions to small and medium-sized businesses (SMEs) through Credit Lines and Instalment Loans. By the end of the first half of 2023, CapitalBox had established four distinct products that operated in five markets: Finland, Sweden, Denmark, Lithuania, and the Netherlands. The company operates under the name CapitalBox AB.
One of the key offerings from CapitalBox is its working capital instalment loans, which extend up to EUR 350,000. These loans come with flexible repayment periods spanning 6 to 48 months. They are specifically tailored to assist SMEs in funding various aspects of their operations such as expansion, inventory management, marketing efforts, hiring new personnel, and acquiring or leasing equipment. On average, businesses borrow around EUR 21,300 with a typical loan duration of 22 months.
Another financing option provided by CapitalBox is the Credit Line. This dynamic form of financing grants SMEs access to a credit limit ranging from EUR 2,000 to EUR 350,000. Additionally, CapitalBox collaborates with retail partners to offer financing solutions to business customers, enabling them to make purchases right at the point of sale.
In the year 2023, CapitalBox introduced a new product known as the Secured Loan. This product was launched initially in Finland and is planned to roll out in other markets as well. The Secured Loan is designed to support larger investments aimed at driving growth for SMEs. The loan amount for this product can go as high as EUR 3.0 million.
In summary, CapitalBox serves as a financial partner to SMEs, offering a range of financing solutions that cater to their diverse needs, from everyday operational expenses to substantial investments in growth.
The results of operations from the Group's operating and reportable segments for current period Q3, Q1-Q3 2023 and comparable period Q3, Q1-Q3 2022 are shown in the tables on the following page.
Operating and reportable segments for Q3 2023
| EUR '000 | Ferratum | SweepBank | CapitalBox | Central | Total |
|---|---|---|---|---|---|
| Gross interest revenue | 48,238 | 5,971 | 6,114 | - | 60,322 |
| Transaction costs | (2,067) | (723) | (343) | - | (3,132) |
| Interest revenue | 46,171 | 5,248 | 5,771 | - | 57,189 |
| Servicing fee revenue | 655 | 22 | - | - | 676 |
| Total revenue | 46,800 | 5,289 | 5,779 | - | 57,866 |
| Share in revenue, in % | 80.9 | 9.1 | 10.0 | - | 100.0 |
| Operating expenses: | |||||
| Impairment loss on loans to customers | (15,000) | (4,259) | (1,995) | - | (21,255) |
| % of revenue | (32.1) | (80.5) | (34.5) | - | (36.7) |
| Bank and lending costs | (2,407) | (302) | (244) | - | (2,953) |
| Personnel expense | (5,175) | (1,791) | (1,439) | - | (8,405) |
| Selling and marketing expense | (2,902) | (73) | (803) | - | (3,777) |
| General and administrative expense | (3,557) | (1,221) | (738) | - | (5,517) |
| Depreciation and amortisation | (2,469) | (1,187) | (252) | - | (3,908) |
| Operating profit (loss) | 15,290 | (3,544) | 308 | - | 12,052 |
| Other income, net | (499) | 4 | 5 | - | (490) |
| Profit (loss) before interests and taxes ('EBIT') | 14,791 | (3,540) | 313 | - | 11,562 |
| EBIT margin, in % | 31.6 | (66.9) | 5.4 | - | 20.0 |
| Allocated finance costs, net | (3,150) | (1,073) | (802) | - | (5,027) |
| Unallocated foreign exchange losses, net | - | - | - | (752) | (752) |
| Share of result in associated companies | - | - | - | 21 | 21 |
| Profit before income taxes | 11,642 | (4,613) | (489) | (731) | 5,805 |
| Profit (loss) before tax margin, in % | 24.9 | (87.2) | (8.5) | - | 10.0 |
| Loans to customers | 330,195 | 124,884 | 93,160 | - | 548,239 |
| Unallocated assets | - | - | - | - | 271,295 |
| Unallocated liabilities | - | - | - | - | 635,167 |
Operating and reportable segments for Q1-Q3 2023
| EUR '000 | Ferratum | Sweep Bank |
Capital Box |
Central | Total |
|---|---|---|---|---|---|
| Gross interest revenue | 139,601 | 16,483 | 17,909 | - | 173,993 |
| Transaction costs | (5,720) | (1,914) | (1,138) | - | (8,771) |
| Interest revenue | 133,881 | 14,569 | 16,771 | - | 165,222 |
| Servicing fee revenue | 2,105 | 67 | - | - | 2,171 |
| Total revenue | 135,959 | 14,656 | 16,779 | - | 167,393 |
| Share in revenue, in % | 81.2 | 8.8 | 10.0 | - | 100.0 |
| Operating expenses: | |||||
| Impairment loss on loans to customers | (44,076) | (12,968) | (4,408) | - | (61,452) |
| % of revenue | (32.4) | (88.5) | (26.3) | - | (36.7) |
| Bank and lending costs | (7,323) | (797) | (793) | - | (8,913) |
| Personnel expense | (15,560) | (5,395) | (4,242) | - | (25,197) |
| Selling and marketing expense | (8,213) | (404) | (2,205) | - | (10,821) |
| General and administrative expense | (10,837) | (3,675) | (2,196) | - | (16,708) |
| Depreciation and amortisation | (6,901) | (3,906) | (690) | - | (11,497) |
| Operating profit (loss) | 43,049 | (12,489) | 2,245 | - | 32,805 |
| Other income, net | (335) | - | - | - | (335) |
| Profit (loss) before interests and taxes ('EBIT') | 42,714 | (12,489) | 2,245 | - | 32,470 |
| EBIT margin, in % | 31.4 | (85.2) | 13.4 | - | 19.4 |
| Allocated finance costs, net | (8,650) | (3,271) | (2,440) | - | (14,362) |
| Unallocated foreign exchange losses, net | - | - | - | (2,991) | (2,991) |
| Share of result in associated companies | - | - | - | 33 | 33 |
| Profit before income taxes | 34,065 | (15,760) | (195) | (2,958) | 15,151 |
| Profit (loss) before tax margin, in % | 25.1 | (107.5) | (1.2) | - | 9.0 |
| Loans to customers | 330,195 | 124,884 | 93,160 | - | 548,239 |
| Unallocated assets | - | - | - | - | 271,295 |
| Unallocated liabilities | - | - | - | - | 635,167 |
Operating and reportable segments for restated Q3 2022
| EUR '000 | Ferratum | Sweep Bank |
Capital Box |
Central | Total |
|---|---|---|---|---|---|
| Gross interest revenue | 46,195 | 4,497 | 5,007 | - | 55,697 |
| Transaction costs | (1,798) | (460) | (313) | - | (2,570) |
| Interest revenue | 44,397 | 4,037 | 4,694 | - | 53,128 |
| Servicing fee revenue | 853 | 23 | - | - | 877 |
| Total revenue | 45,250 | 4,060 | 4,694 | - | 54,004 |
| Share in revenue, in % | 83.8 | 7.5 | 8.7 | - | 100.0 |
| Operating expenses: | |||||
| Impairment loss on loans to customers | (14,998) | (3,764) | (1,356) | - | (20,118) |
| % of revenue | (33.1) | (92.7) | (28.9) | - | (37.3) |
| Bank and lending costs | (2,526) | (374) | (781) | - | (3,681) |
| Personnel expense | (4,507) | (1,965) | (1,447) | - | (7,918) |
| Selling and marketing expense | (1,963) | (559) | (474) | - | (2,996) |
| General and administrative expense | (3,313) | (1,424) | (1,097) | - | (5,835) |
| Depreciation and amortisation | (2,727) | (1,655) | (186) | - | (4,569) |
| Operating profit (loss) | 15,217 | (5,681) | (647) | - | 8,887 |
| Other income, net | 168 | 12 | 19 | - | 198 |
| Profit (loss) before interests and taxes ('EBIT') | 15,385 | (5,669) | (628) | - | 9,085 |
| EBIT margin, in % | 34.0 | (139.6) | (13.4) | - | 16.8% |
| Allocated finance costs, net | (1,934) | (834) | (503) | - | (3,271) |
| Unallocated foreign exchange losses, net | - | - | - | (939) | (939) |
| Profit before income taxes | 13,450 | (6,503) | (1,131) | (939) | 4,875 |
| Profit (loss) before tax margin, in % | 29.7 | (160.2) | (24.1) | - | 9.0 |
| Loans to customers | 290,395 | 120,034 | 82,434 | - | 492,863 |
| Unallocated assets | - | - | - | - | 256,609 |
| Unallocated liabilities | - | - | - | - | 568,766 |
Operating and reportable segments for restated Q1-Q3 2022
| EUR '000 | Ferratum | Sweep Bank |
Capital Box |
Central | Total |
|---|---|---|---|---|---|
| Gross interest revenue | 135,087 | 11,253 | 15,883 | - | 162,222 |
| Transaction costs | (5,256) | (1,116) | (775) | - | (7,147) |
| Interest revenue | 129,831 | 10,137 | 15,108 | - | 155,075 |
| Servicing fee revenue | 2,443 | 54 | - | - | 2,498 |
| Total revenue | 132,274 | 10,191 | 15,108 | - | 157,573 |
| Share in revenue, in % | 83.9 | 6.5 | 9.6 | - | 100.0 |
| Operating expenses: | |||||
| Impairment loss on loans to customers | (44,030) | (7,980) | (5,862) | - | (57,872) |
| % of revenue | (33.3) | (78.3) | (38.8) | - | (36.7) |
| Bank and lending costs | (8,236) | (1,062) | (1,237) | - | (10,535) |
| Personnel expense | (14,476) | (7,183) | (4,201) | - | (25,860) |
| Selling and marketing expense | (5,963) | (1,674) | (2,118) | - | (9,755) |
| General and administrative expense | (10,942) | (5,541) | (2,900) | - | (19,384) |
| Depreciation and amortisation | (9,060) | (3,105) | (475) | - | (12,640) |
| Operating profit (loss) | 39,568 | (16,354) | (1,685) | - | 21,528 |
| Other income, net | 128 | 9 | 14 | - | 151 |
| Profit (loss) before interests and taxes ('EBIT') | 39,696 | (16,345) | (1,671) | - | 21,679 |
| EBIT margin, in % | 30.0 | (160.4) | (11.1) | - | 13.8 |
| Allocated finance costs, net | (7,100) | (2,601) | (1,846) | - | (11,547) |
| Unallocated foreign exchange losses, net | - | - | - | (2,237) | (2,237) |
| Profit before income taxes | 32,595 | (18,946) | (3,517) | (2,237) | 7,894 |
| Profit (loss) before tax margin, in % | 24.6 | (185.9) | (23.3) | - | 5.0 |
| Loans to customers | 290,395 | 120,034 | 82,434 | - | 492,863 |
| Unallocated assets | - | - | - | - | 256,609 |
| Unallocated liabilities | - | - | - | - | 568,766 |
5. Revenue
The Group analyses revenues by type and geographic market that represents how economic factors impact the nature, amount, timing, uncertainty, and cash flows of the above revenue streams. Revenues recognised per geographic market, including the composition of each geographic market, for the comparative periods and presented for each type separately, are as follows:
Interest revenue by geographic market
| EUR '000 | Q3 2023 | Q1-Q3 2023 |
Restated Q3 2022 |
Restated Q1-Q3 2022 |
|
|---|---|---|---|---|---|
| Country of domicile |
Finland | 6,192 | 18,418 | 6,211 | 19,419 |
| Northern Europe |
Sweden, Denmark, Norway | 18,498 | 53,565 | 16,857 | 48,836 |
| Western Europe |
Germany, Netherlands, Spain | 10,765 | 30,673 | 9,906 | 26,650 |
| Eastern Europe* |
Bulgaria, Croatia, Czechia, Estonia, Latvia, Lithuania, Poland, Romania |
21,227 | 61,297 | 18,771 | 54,855 |
| Other | Australia, Brazil, Mexico | 507 | 1,269 | 1,382 | 5,316 |
| Total | 57,189 | 165,222 | 53,127 | 155,076 |
* There are no active business or portfolios in Belarus, Ukraine, or Russian Federation.
Interest revenue is calculated using the effective interest rate method based on loans to customers after considering fees directly attributable to the origination of the loans.
Servicing fee revenue by geographic market
| EUR '000 | Q3 2023 | Q1-Q3 2023 |
Restated Q3 2022 |
Restated Q1-Q3 2022 |
|
|---|---|---|---|---|---|
| Country of domicile |
Finland | 42 | 119 | 47 | 146 |
| Northern Europe |
Sweden, Denmark, Norway | 208 | 735 | 287 | 813 |
| Western Europe |
Germany, Netherlands, Spain | 140 | 490 | 173 | 467 |
| Eastern Europe* |
Bulgaria, Croatia, Czechia, Estonia, Latvia,Lithuania, Poland, Romania |
273 | 785 | 356 | 1,024 |
| Other | Australia, Brazil, Mexico | 13 | 40 | 14 | 47 |
| Total | 676 | 2,171 | 877 | 2,497 |
* There are no active business or portfolios in Belarus, Ukraine, or Russian Federation.
Servicing fee revenue includes charges to customers that are not directly attributable to loan origination and are recognised at the point in time when the Group satisfies the underlying performance obligations, usually when such fees are due from the customer upon invoicing.
The Group recognises interest revenue minus the amortised transaction costs directly attributable to financial asset acquisition following sections 5.1 and 5.4 of IFRS 9. The transaction costs are mainly fees paid to brokers and affiliates that are irrevocably charged for the factual drown-downs of new loans. The following table shows transaction costs deducted from the gross revenue:
| EUR '000 | Q3 2023 | Q1-Q3 2023 | Restated Q3 2022 |
Restated Q1-Q3 2022 |
|
|---|---|---|---|---|---|
| Gross interest revenue | 60,322 | 173,993 | 55,699 | 162,223 | |
| Transaction costs | (3,132) | (8,771) | (2,571) | (7,147) | |
| Interest revenue | 57,189 | 165,222 | 53,128 | 155,076 |
6. Loans and advances to customers
The Group calculates expected credit losses ("ECL") as a function of the estimated exposure of default ("EAD"), probability of default ("PD"), loss given default ("LGD"), and where applicable, discounting using the effective interest rate ("EIR").
The ECL is measured on either a 12-month or on a lifetime basis depending on whether the underlying loans to customers are not credit-impaired (Stage 1), whether a significant increase in credit risk has occurred since initial recognition (Stage 2), or whether an asset is considered to be credit-impaired (Stage 3). In this assessment, the Group considers relevant, reasonable, and supportable information based on historical data, credit scoring, delinquency status, and days past due ("DPD"), and other forward-looking factors.
Due to the relatively high volume and low value of the underlying loans to customers, the Group generally considers that a significant increase in credit risk has occurred for Micro Loans, Plus Loans, and Credit Limit facilities when the outstanding loan balances exceed 30 DPD, and accordingly categorises the underlying loans to customers and measures ECL under Stage 2.
Accordingly, the Group considers that default has occurred when outstanding balances for Micro Loans exceed 90 DPD, and outstanding balances for Plus Loans, Prime Loans, Credit Limit facilities and SME loans exceed 60 to 90 DPD, depending on the market where the portfolio originated. ECL for the underlying loans to customers are categorised under Stage 3. Loss allowances on loans to customers under Stages 2 and Stage 3 are measured based on expected credit losses occurring throughout the lifetime of the financial assets ("lifetime ECL").
The Group further categorises outstanding loans to customers using an internal risk grading system based on their credit quality and performance, with "Regular" considered to be "performing" and not-credit impaired (Stage 1), "Watch" and "Substandard" considered as "underperforming" with occurrence of SICR since initial recognition (Stage 2), and "Doubtful" and "Loss" considered to be "non-performing" and credit-impaired (Stage 3).
The tables below show the Group's gross outstanding loans to customers balances, risk grading, and basis for ECL recognition and measurement, including the movements and balances of loss allowances for loans to customers for the periods presented:
Gross outstanding loans to customers risk grading and basis for ECL recognition
| Days past due* | Restated | |||||||
|---|---|---|---|---|---|---|---|---|
| Risk grade | Category | Basis for ECL | Lower range |
Upper range |
UTP | 30 Sep 2023 |
30 Sep 2022 |
31 Dec 2022 |
| Regular | Performing | Stage 1 (12-month ECL) |
0 to 30 | - | 507,775 | 451,354 | 464,238 | |
| Watch | Underperforming | Stage 2 (lifetime ECL) |
31 - 45 | 31 - 60 | - | 22,738 | 21,602 | 20,755 |
| Substandard | Underperforming | Stage 2 (lifetime ECL) |
46 - 60 | 61 - 90 | - | 15,333 | 10,827 | 14,862 |
| Doubtful | Non-performing | Stage 3 (lifetime ECL) |
61 - 180 | 91 - 180 | Yes | 21,654 | 28,913 | 24,868 |
| Loss | Non-performing | Stage 3 (lifetime ECL) |
days | More than 180 | - | 99,238 | 89,528 | 95,072 |
| Total | 666,738 | 602,224 | 619,794 |
*Lower and upper ranges of days past due are based on DPD thresholds of 60 and 90 days, respectively, to be considered as non-performing.
At and for the period ended 30 September 2023:
| EUR '000 30 September 2023 |
|||||
|---|---|---|---|---|---|
| Stage 1 12-month ECL |
Stage 2 Lifetime ECL |
Stage 3 Lifetime ECL |
Total | ||
| GROSS LOANS TO CUSTOMERS | |||||
| At 1 January 2023 | 464,239 | 35,616 | 119,940 | 619,795 | |
| Total changes in gross carrying amounts arising from transfers in stages, originations and derecognitions |
47,646 | 2,763 | 54,682 | 105,091 | |
| Loans and advances written off and sold during the period | - | - | (52,752) | (52,752) | |
| FX and other movements | (4,109) | (308) | (978) | (5,395) | |
| Total net change during the period | 43,537 | 2,455 | 952 | 46,944 | |
| Gross loans to customers at 30 September 2023 | 507,776 | 38,071 | 120,892 | 666,739 | |
| LOSS ALLOWANCES | |||||
| At 1 January 2023 | 24,949 | 11,024 | 74,359 | 110,332 | |
| Increase in allowances - charged to profit or loss | 2,726 | 1,171 | 57,554 | 61,451 | |
| Other movements | |||||
| Unwind of discount | - | - | 108 | 108 | |
| Loans and advances written off and sold during the period | - | - | (52,752) | (52,752) | |
| Exchange differences | (149) | (66) | (426) | (641) | |
| Total net change during the period | 2,577 | 1,105 | 4,484 | 8,166 | |
| Loss allowance at 30 September 2023 | 27,525 | 12,129 | 78,844 | 118,498 | |
| Impaired loan coverage ratio ("ILCR") | 5.4% | 31.9% | 65.2% | 17.8% |
At and for the period ended 30 September 2022:
| EUR '000 | Restated 30 September 2022 | ||||
|---|---|---|---|---|---|
| Stage 1 12-month ECL |
Stage 2 Lifetime ECL |
Stage 3 Lifetime ECL |
Total | ||
| GROSS LOANS TO CUSTOMERS | |||||
| At 1 January 2022 | 394,448 | 29,623 | 149,637 | 573,708 | |
| Total changes in gross carrying amounts arising from transfers in stages, originations and derecognitions |
62,432 | 3,211 | 40,777 | 106,420 | |
| Loans and advances written off and sold during the period | - | - | (70,496) | (70,496) | |
| FX and other movements | (5,527) | (404) | (1,477) | (7,408) | |
| Total net change during the period | 56,905 | 2,807 | (31,196) | 28,516 | |
| Gross loans to customers at 30 September 2022 | 451,353 | 32,430 | 118,441 | 602,224 | |
| LOSS ALLOWANCES | |||||
| At 1 January 2022 | 20,608 | 8,806 | 92,595 | 122,009 | |
| Increase in allowances - charged to profit or loss | 3,668 | 1,099 | 53,105 | 57,872 | |
| Other movements | |||||
| Unwind of discount | - | - | 338 | 338 | |
| Loans and advances written off and sold during the period | - | - | (70,496) | (70,496) | |
| Exchange differences | (80) | (33) | (248) | (361) | |
| Total net change during the period | 3,588 | 1,066 | (17,301) | (12,647) | |
| Loss allowance at 30 September 2022 | 24,196 | 9,872 | 75,294 | 109,362 | |
| Impaired loan coverage ratio ("ILCR") | 5.4% | 30.4% | 63.6% | 18.2% |
At and for the year ended 31 December 2022:
| EUR '000 31 December 2022 |
||||||
|---|---|---|---|---|---|---|
| Stage 1 12-month ECL |
Stage 2 Lifetime ECL |
Stage 3 Lifetime ECL |
Total | |||
| GROSS LOANS TO CUSTOMERS | ||||||
| At 1 January 2022 | 394,447 | 29,623 | 149,637 | 573,707 | ||
| Total changes in gross carrying amounts arising from transfers in stages, originations and derecognitions |
78,446 | 6,673 | 61,428 | 146,547 | ||
| Loans and advances written off and sold during the period | - | - | (89,444) | (89,444) | ||
| FX and other movements | (8,655) | (680) | (1,681) | (11,016) | ||
| Total net change during the year | 69,791 | 5,993 | (29,697) | 46,087 | ||
| Gross loans to customers at 31 December 2022 | 464,239 | 35,616 | 119,940 | 619,795 | ||
| LOSS ALLOWANCES | ||||||
| At 1 January 2022 | 20,608 | 8,806 | 92,595 | 122,009 | ||
| Increase in allowances - charged to profit or loss | 4,806 | 2,387 | 71,468 | 78,661 | ||
| Other movements | ||||||
| Unwind of discount | - | - | 480 | 480 | ||
| Loans and advances written off and sold during the period | - | - | (89,444) | (89,444) | ||
| Exchange differences | (465) | (169) | (740) | (1,374) | ||
| Total net change during the year | 4,341 | 2,218 | (18,236) | (11,677) | ||
| Loss allowance at 31 December 2022 | 24,949 | 11,024 | 74,359 | 110,332 | ||
| Impaired loan coverage ratio ("ILCR") | 5.4% | 31.0% | 62.0% | 17.8% |
Transfers out of Stage 1 are driven by the underlying gross loans to customers to have significant increase in credit risks since initial recognition (Stage 2) or become credit-impaired (Stage 3). In contrast, transfers out of Stages 2 or 3 result from the underlying gross loans to customers no longer meeting said definitions.
Transfers in between Stages or changes within DPD bucket that do not necessarily impact the ECL model stages could also increase (decrease) loss allowances during the year.
Remeasurements from changes in ECL model, inputs and assumptions are mainly driven by updating the calculations, statistics and modelling parameters relating to EAD, PD, LGD, and EIR based on the most recent available information at the reporting date. The unwind of discount is driven by the amortisation of the ECL present value for long-outstanding loans to customers.
Macro-economic variables
The Group utilises an "Error Correction Model" ("ECM") to determine the relationship between the performance of each market's loan portfolios and the underlying macro-economic factors. ECM establishes a strong statistically significant relationship between the portfolio performance, the underlying macro-economic variables, and market and portfolio-specific spectrum. ECM considers both short and long-term effects of identified macro-economic variables through multiple regression analysis against the time series of defaults observed at a specific market and portfolio. Further, ECM allows for error corrections by providing observed deviations from long-run equilibrium that can influence short-run dynamics. It considers the speed at which defaults return to equilibrium after changing the macroeconomic variables considering the long-term equilibrium. The model also establishes stricter requirements for new loans and overall improvement in the average quality of the customer base.
Accordingly, the Group has determined that the key drivers for Micro Loans, Plus Loans, Credit Limit facilities and Prime Loans are Gross Domestic Product ("GDP"), Personal Disposable Income ("PDI") and Unemployment Rate ("UR"), whereas the Consumption Rate Private ("CRP") is the key driver for SME loans.
For these key drivers, the Group relies on the market-level data published by Oxford Economics. To capture a range of possible future outcomes, three possible scenarios are considered in the determination of the ECL - "base line", "downside" and "upside". The current model assumes the "downside" scenario to be "Tighter credit conditions" and the "upside" to be "Excess savings run-down". This quarter`s scenarios quantify key risks to the global economy. These relate primarily to banking stress and credit conditions, cost and price pressures, and the degree of consumer caution, as well as the associated impact on monetary policy, financial and property markets, and potential supply.
"Tighter credit conditions" - Banking stress spills over to the real economy as more small banks fail and tighter credit conditions weigh on activity for a sustained period. "Excess savings run-down" - Household savings built up during the pandemic unwind, resulting in a more robust consumer-led recovery.
The following tables show the outlooks associated with the macro-economic variables ("MEV") utilised in the calculation of expected credit losses ("ECL") for the periods presented herein:
Unemployment rate
| In % | 2023 | 2024 | 2025 | 2026 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Base | Down | Up | Base | Down | Up | Base | Down | Up | Base | Down | Up | |
| Bulgaria | 4.8 | 4.8 | 4.8 | 5.0 | 5.2 | 4.8 | 4.8 | 5.1 | 4.4 | 4.8 | 5.0 | 4.6 |
| Czechia | 3.7 | 3.7 | 3.7 | 4.0 | 4.3 | 3.6 | 3.8 | 4.2 | 3.2 | 3.7 | 3.9 | 3.3 |
| Lithuania | 7.3 | 7.3 | 7.3 | 6.5 | 6.7 | 6.4 | 6.1 | 6.3 | 6.0 | 5.6 | 5.6 | 5.6 |
| Finland | 7.4 | 7.4 | 7.4 | 7.3 | 7.5 | 7.2 | 6.7 | 6.9 | 6.5 | 6.3 | 6.4 | 6.2 |
| Netherlands | 3.8 | 3.8 | 3.8 | 4.3 | 4.6 | 3.8 | 4.5 | 4.9 | 3.8 | 4.5 | 4.8 | 4.1 |
| Poland | 5.5 | 5.5 | 5.5 | 5.0 | 5.3 | 4.9 | 4.7 | 5.1 | 4.4 | 4.8 | 5.1 | 4.6 |
| Latvia | 6.2 | 6.2 | 6.2 | 5.5 | 5.6 | 5.4 | 4.5 | 4.7 | 4.4 | 4.6 | 4.6 | 4.6 |
| Slovenia | 5.6 | 5.6 | 5.6 | 6.3 | 6.5 | 6.2 | 6.6 | 6.7 | 6.4 | 6.8 | 6.8 | 6.8 |
| Germany | 5.7 | 5.7 | 5.7 | 5.6 | 5.9 | 5.1 | 5.2 | 5.7 | 4.5 | 5.0 | 5.4 | 4.7 |
Personal disposable income
| Billion units | 2023 | 2024 | 2025 | 2026 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cur. | Base | Down | Up | Base | Down | Up | Base | Down | Up | Base | Down | Up | |
| Bulgaria | LEV | 7 | 7 | 7 | 7 | 7 | 7 | 7 | 7 | 7 | 7 | 7 | 7 |
| Romania | LEI | 16 | 16 | 16 | 17 | 17 | 17 | 18 | 18 | 18 | 19 | 19 | 19 |
| Estonia | EUR | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| Finland | EUR | 10 | 10 | 10 | 10 | 10 | 11 | 11 | 11 | 11 | 11 | 11 | 11 |
| Norway | NOK | 139 | 139 | 139 | 143 | 143 | 143 | 147 | 147 | 148 | 151 | 151 | 151 |
| Sweden | SEK | 238 | 238 | 238 | 240 | 240 | 241 | 244 | 242 | 245 | 247 | 246 | 248 |
| Netherlands | EUR | 34 | 34 | 34 | 34 | 34 | 34 | 34 | 34 | 35 | 35 | 35 | 35 |
Consumption rate private
| Billion units |
2023 | 2024 | 2025 | 2026 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cur. | Base | Down | Up | Base | Down | Up | Base | Down | Up | Base | Down | Up | |||
| Denmark | DKK | 85 | 85 | 85 | 87 | 87 | 88 | 90 | 89 | 91 | 93 | 92 | 93 | ||
| Finland | EUR | 10 | 10 | 10 | 10 | 10 | 10 | 11 | 10 | 11 | 11 | 11 | 11 |
Gross domestic product
| Billion units |
2023 | 2024 | 2024 | 2025 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cur. | Base | Down | Up | Base | Down | Up | Base | Down | Up | Base | Down | Up | ||
| Brazil | BRL | 166 | 166 | 166 | 166 | 165 | 167 | 170 | 168 | 171 | 174 | 172 | 175 | |
| Denmark | DKK | 191 | 191 | 191 | 196 | 195 | 198 | 203 | 201 | 205 | 209 | 207 | 210 | |
| Germany | EUR | 270 | 270 | 270 | 273 | 269 | 277 | 278 | 275 | 284 | 284 | 282 | 287 | |
| Romania | LEI | 16 | 16 | 16 | 16 | 16 | 16 | 17 | 17 | 17 | 17 | 17 | 17 | |
| Croatia | EUR | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | |
| Sweden | SEK | 493 | 493 | 493 | 497 | 493 | 500 | 508 | 503 | 513 | 519 | 515 | 522 |
7. Personnel expenses
| EUR '000 | Q3 2023 |
Q1-Q3 2023 |
Restated Q3 2022 |
Restated Q1-Q3 2022 |
|---|---|---|---|---|
| Wages and salaries | (6,899) | (20,516) | (6,093) | (20,878) |
| Social security costs | (727) | (2,232) | (951) | (2,690) |
| Post-employment benefit expense | (388) | (1,182) | (429) | (1,370) |
| Share-based payment expense | (120) | (377) | (128) | (347) |
| Other personnel expense | (272) | (889) | (317) | (575) |
| Total personnel expenses | (8,405) | (25,197) | (7,918) | (25,860) |
8. Other income
| EUR '000 | Q3 2023 |
Q1-Q3 2023 |
Restated Q3 2022 |
Restated Q1-Q3 2022 |
|---|---|---|---|---|
| OTHER INCOME | ||||
| Other income | 2 | 2 | 198 | 151 |
| Total other income | 2 | 2 | 198 | 151 |
| OTHER EXPENSE | ||||
| Loss from disposal of non-current assets | (26) | (55) | - | - |
| Other expense | (465) | (282) | - | - |
| Total other expense | (491) | (337) | - | - |
| Net other income (expense) | (490) | (335) | 198 | 151 |
Other expense includes financial result from disposal of companies and movement in provisions related to such disposals.
9. Finance income and costs
| EUR '000 | Q3 2023 |
Q1-Q3 2023 |
Restated Q3 2022 |
Restated Q1-Q3 2022 |
|---|---|---|---|---|
| FINANCE INCOME | ||||
| Interest income | 657 | 1,428 | 60 | 286 |
| Total finance income | 657 | 1,428 | 60 | 286 |
| FINANCE COSTS | ||||
| Interest expense on borrowings | (5,220) | (13,746) | (2,460) | (10,169) |
| Net realised foreign exchange loss | (39) | (550) | (157) | (1,688) |
| Net unrealised foreign exchange loss | (473) | (1,281) | (1,273) | (830) |
| Net unrealised foreign exchange loss on derivatives | (594) | (1,839) | (206) | (416) |
| Interest expense on lease liabilities | (120) | (333) | (44) | (160) |
| Other finance costs | 10 | (1,033) | (130) | (807) |
| Total finance costs | (6,435) | (18,781) | (4,270) | (14,070) |
| Net finance costs | (5,779) | (17,353) | (4,210) | (13,784) |
10. Income taxes
| EUR '000 | Q3 2023 |
Q1-Q3 2023 |
Restated Q3 2022 |
Restated Q1-Q3 2022 |
|---|---|---|---|---|
| Current income tax expense | (448) | (1,394) | (147) | (404) |
| Deferred tax expense | (483) | (1,402) | (325) | (484) |
| Total income tax expense | (931) | (2,796) | (472) | (888) |
Income tax expense is recognised based on Group's estimate of the weighted average effective annual income tax rate expected for the full financial year applicable to each Group company.
11. Earnings per share
| EUR '000 | Q3 2023 |
Q1-Q3 2023 |
Restated Q3 2022 |
Restated Q1-Q3 2022 |
|---|---|---|---|---|
| Profit for the period | 4,875 | 12,355 | 3,966 | 6,096 |
| Perpetual bonds interests recognised directly in retained earnings, net of tax* |
(1,775) | (4,281) | (920) | (2,403) |
| Profit for the period, after perpetual bond interest | 3,100 | 8,074 | 3,046 | 3,693 |
| Weighted average number of ordinary shares in issue ** | 21,578 | 21,578 | 21,578 | 21,578 |
| Total adjusted earnings per share attributable to the ordinary equity, EUR |
0.14 | 0.37 | 0.14 | 0.17 |
*Earnings per share are calculated using profit (loss) adjusted for interest expense from perpetual bonds that are recorded directly in retained earnings
**There are no items that have dilutive impact on the weighted average number of ordinary shares, and as such, basic and diluted for all periods presented.
12. Financial assets and liabilities classification and fair value
The table below summarises the Group's financial assets and liabilities presented based on their classification based on their subsequent measurement, at amortised cost or FVPL; and based on their fair value measurement hierarchy, Level 1 being market values for exchange-traded products, Level 2 being primarily based on quotes from third-party pricing services and Level 3 requiring most management judgment:
Financial assets
| Fair value | 30 September 2023 | 31 December 2022 | |||
|---|---|---|---|---|---|
| EUR '000 | measure ment |
Carrying amount |
Fair value | Carrying amount |
Fair value |
| FINANCIAL ASSETS AT FVPL | |||||
| Derivative financial assets | Level 2 | 603 | 603 | 3,180 | 3,180 |
| FINANCIAL ASSETS AT AMORTISED COST | |||||
| Loans to customers | Level 3 | 548,239 | 548,239 | 509,463 | 509,463 |
| Cash and cash equivalents | Level 3 | 167,040 | 167,040 | 153,325 | 153,325 |
| Other non-current financial assets | Level 3 | 43,368 | 43,368 | 28,883 | 28,883 |
| Receivables from sold portfolios | Level 3 | 4,362 | 4,362 | 2,263 | 2,263 |
| Receivables from banks | Level 3 | 3,438 | 3,438 | 4,362 | 4,362 |
| Other current financial assets | Level 3 | 3,804 | 3,804 | 3,701 | 3,701 |
| Total | 770,854 | 770,854 | 705,177 | 705,177 |
The fair value of derivative financial assets is determined using level 2 fair value measurement. The derivative assets include currency forwards and tracker forwards. It is calculated as the present value of the estimated future cash flows based on observable yield curves (income method). With currency forwards, the Group agrees to sell a predetermined amount of its foreign currency exposure at a predetermined price. Regarding tracker forwards, the Group agrees to sell a predetermined amount of its foreign currency exposure at a predetermined price and buy its functional currency at the higher of the spot rate and a predetermined rate, thereby limiting the Group's downward exposure.
Receivables from banks include deposits held with other banks for the purpose of hedging.
Other non-current financial assets at 30 September 2023 include investment in warehouse lending and related corporate loans amounting to EUR 43.4 million. The value of this item is determined using level 3 fair value measurement.
The fair values of the remaining financial assets measured at amortised cost are determined using level 3 fair value measurement based significantly on unobservable inputs. The Group estimates that the carrying amounts of these financial assets reasonably approximate their fair values at 30 September 2023 and 31 December 2022.
Financial liabilities
| 30 September 2023 | 31 December 2022 | ||||
|---|---|---|---|---|---|
| EUR '000 | Fair value measure ment |
Carrying amount |
Fair value | Carrying amount |
Fair value |
| FINANCIAL LIABILITIES AT FVPL | |||||
| Derivative financial liabilities | Level 2 | 2,203 | 2,203 | 446 | 446 |
| FINANCIAL LIABILITIES AT AMORTISED COST |
|||||
| Deposits from customers | Level 3 | 547,668 | 547,668 | 501,734 | 501,734 |
| Long-term borrowings | Level 1 | 47,165 | 48,401 | 46,791 | 48,439 |
| Lease liabilities | Level 3 | 5,295 | 5,295 | 4,566 | 4,566 |
| Trade payables | Level 3 | 10,615 | 10,615 | 6,314 | 6,314 |
| Accruals and other current liabilities |
Level 3 | 19,597 | 19,597 | 11,531 | 11,531 |
| Total | 632,543 | 633,779 | 571,382 | 573,030 |
2022 Multitude Bank tranche bonds
The Multitude Bank p.l.c. tranche bonds (series no. 1/2022 - ISIN: MT0000911215) ("2022 FBM tranche bonds") were issued on 13 April 2022 with a coupon rate of 6% maturing on 13 April 2032. Out of the EUR 5.1 million bonds issued, EUR 2 million was issued to Multitude SE, which was eliminated at the Group level as part of the consolidation process. At 30 September 2023, the 2022 FBM tranche bonds are presented as long-term borrowings in the Group's consolidated statement of financial position and have outstanding nominal and carrying amounts of EUR 3.1 million and EUR 2.8 million, respectively.
2022 Multitude SE senior unsecured bonds
Multitude SE senior unsecured bonds (ISIN: NO0012702549) were issued on 7 December 2022 with a coupon rate of 7.5% plus 3-month Euribor, maturing in December 2025 (the "2022 MSE Bonds"). At 30 September 2023, the 2022 MSE Bonds are presented as long-term borrowings in the Group's consolidated statement of financial position, have outstanding nominal and carrying amounts of EUR 46.0 million and EUR 44.6 million, respectively.
Financial liabilities fair value measurements
The fair value of derivative financial liabilities is determined using level 2 fair value measurement. It is calculated as the present value of the estimated future cash flows based on observable yield curves. The fair value of long-term and short-term borrowings that includes only listed bonds (2022 Multitude Bank tranche bonds and 2022 Multitude SE senior unsecured bonds) is determined using level 1 fair value measurement based on the published quotes in the Frankfurt Stock Exchange Open Market, Frankfurt Stock Exchange Prime Standard, and Malta Stocks Exchange, respectively.
The fair value of the remaining financial liabilities measured at amortised cost is determined using level 3 fair value measurement based significantly on unobservable inputs. The Group estimates that the carrying amounts of these financial liabilities reasonably approximate their fair values at the periods presented.
13. Correction of a prior period errors and a change of presentation
Brokerage fees on loans and deposits
During the financial year ended 31 December 2022, the Group corrected how sales and commission fees payable to third parties of specific lending products are recognised, and the pattern and method of recognition of the fees within the consolidated statement of profit or loss. Previously these costs were expensed as incurred and presented within selling and marketing expense. Subsequent to the correction, such fees which are transaction costs directly attributable to the acquisition of loans to customers and deposits from customers, are adjusted against the initial fair value of the instrument and are amortised to the statement of profit or loss over the estimated life of the related loans and deposits received applying the effective interest rate method.
The impact of the correction is that the timing of the expense recognition changes, and both the interest income and fee expenses decrease within the statement of profit or loss. Interest revenue decreased by EUR 5.3 million and selling and marketing expense decreased by EUR 6.1 million in Q1-Q3 2022. At the same time, loans to customers increased by EUR 8.1 million as of 30 September 2022. The correction with impacts to profit or loss led to an increase in deferred tax liability by EUR 0.2 million as of 30 September 2022. Retained earnings increased by EUR 4.7 million as of 30 September 2022. Comparative financial information presented within the consolidated statement of financial position and consolidated statement of profit or loss has been restated, as presented in the tables below. The impact on the earnings per share is included in the following tables.
Classification of loans to customers as non-current or current
The Group has corrected the classification of loans to customers as current and non-current in the statement of financial position and restated the comparative financial information accordingly. Previously, the Group incorrectly classified loans to customers which did not meet the current asset criteria in IAS 1 as current assets. The Group reclassified loans to customers with maturity exceeding 12 months from current assets to non-current assets totalling to EUR 96.9 million as of 30 September 2022. The correction relates solely to the presentation in the statement of financial position, and it has no impact on the results.
Classification of cash flows on deposits from customers to cash flows from financing activities
The Group corrected the presentation of cash flows from deposits from customers in the consolidated statement of cash flows to cash flows from financing and restated the comparative period. Previously the Group classified the deposit related cash flows as part of the cash flows from its net cash flows from operating activities. As a result, net cash flows from operating activities increased by EUR 32.4 million in Q1-Q3 2022 with a corresponding decrease in cash flows from financing activities.
Consolidated statement of financial position
| EUR '000 | Reported 30 September 2022 |
Brokerage fee |
Classification of loans |
Total correction |
Restated 30 September 2022 |
|---|---|---|---|---|---|
| ASSETS | |||||
| Non-current assets: | |||||
| Loans to customers | - | - | 96,947 | 96,947 | 96,947 |
| Current assets: | |||||
| Loans to customers | 484,736 | - | (88,821) | (88,821) | 395,915 |
| Prepaid expenses and other current assets |
5,863 | (3,163) | - | (3,163) | 2,700 |
| EQUITY | |||||
| Retained earnings | 70,611 | 4,734 | - | 4,734 | 75,345 |
| LIABILITIES | |||||
| Non-current liabilities: | |||||
| Deferred tax liabilities | 594 | 230 | - | 230 | 824 |
Consolidated statement of profit or loss and Consolidated statement of comprehensive income
| EUR '000 | Reported Q1-Q3 2022 |
Brokerage fee | Restated Q1-Q3 2022 |
|---|---|---|---|
| Interest revenue | 160,332 | (5,256) | 155,076 |
| Total revenue | 162,829 | (5,256) | 157,573 |
| Selling and marketing expense | (15,867) | 6,112 | (9,755) |
| Operating profit | 20,671 | 857 | 21,528 |
| Profit before interests and taxes ("EBIT") | 20,822 | 857 | 21,679 |
| Finance income (cost) | (13,079) | (705) | (13,784) |
| Profit before income taxes | 7,742 | 152 | 7,894 |
| Income tax expense | (1,776) | (22) | (1,798) |
| Profit for the year | 5,967 | 130 | 6,097 |
| EUR '000 | Reported Q3 2022 |
Brokerage fee | Restated Q3 2022 |
|---|---|---|---|
| Interest revenue | 54,926 | (1,798) | 53,128 |
| Total revenue | 55,802 | (1,798) | 54,004 |
| Selling and marketing expense | (5,086) | 2,090 | (2,996) |
| Operating profit | 8,595 | 293 | 8,888 |
| Profit before interests and taxes ("EBIT") | 8,793 | 293 | 9,086 |
| Finance income (cost) | (3,969) | (241) | (4,210) |
| Profit before income taxes | 4,823 | 52 | 4,875 |
| Income tax expense | (902) | (8) | (910) |
| Profit for the year | 3,922 | 45 | 3,967 |
Consolidated statement of cash flows
| EUR '000 | Reported Q1-Q3 2022 |
Brokerage fee |
Classification of deposits |
Total correction |
Restated Q1-Q3 2022 |
|---|---|---|---|---|---|
| Profit for the year | 5,966 | 130 | - | 130 | 6,096 |
| Finance costs, net | 12,369 | 705 | - | 705 | 13,074 |
| Decrease (-) in trade payables and other liabilities |
(5,823) | (835) | - | (835) | (6,658) |
| Movement in deposits from customers | (32,395) | - | 32,395 | 32,395 | - |
| Net cash flows from (used in) operating activities |
(74,522) | - | 32,395 | 32,395 | (42,127) |
| Movement in deposits from customers | - | - | (32,395) | (32,395) | (32,395) |
| Net cash flows used in financing activities |
(47,335) | - | (32,395) | (32,395) | (79,730) |
| EUR '000 | Reported Q3 2022 |
Brokerage fee |
Classification of deposits |
Total correction |
Restated Q3 2022 |
|---|---|---|---|---|---|
| Profit for the year | 3,921 | 45 | - | 45 | 3,966 |
| Finance costs, net | 3,865 | 241 | - | 241 | 4,106 |
| Decrease (-) in trade payables and other liabilities |
(5,749) | (285) | - | (285) | (6,034) |
| Movement in deposits from customers | 27,552 | - | (27,552) | (27,552) | - |
| Net cash flows from (used in) operating activities |
12,333 | - | (27,552) | (27,552) | (15,219) |
| Movement in deposits from customers | - | - | 27,552 | 27,552 | 27,552 |
| Net cash flows from (used in) financing activities |
(3,005) | - | 27,552 | 27,552 | 24,547 |
Investor relations contacts
Lasse Mäkelä
Chief Strategy and IR Officer E: [email protected] M: +41 79 371 3417
Bernd Egger
Chief Financial Officer E: [email protected] M: +49 173 7931235
For further information on the Multitude share and all publications, please visit
www.multitude.com