The offering of Tier 2 Notes was not a surprise to us, but the magnitude of the offering was slightly bigger than we expected, and the cost of the Notes seemed to be on the high side. We will incorporate the proceeds into our estimates in our next update.

The offering did not come as a surprise

Multitude announced today a 25 MEUR offering of Tier 2 Notes, issued by the Group’s subsidiary, Multitude Bank. The offering didn’t come as a surprise since the total capital ratio of Multitude Bank has been rather close to its minimum requirement (H1’24: 17.3 % vs. 17.0 % requirement). The company has additional liquidity and buffers at the Group level, but to our understanding, the bank should be able to operate as a stand-alone entity. With the proceeds from the Tier 2 offering, we expect the total capital ratio to increase to around 20%, well above the minimum requirements. All in all, the visibility of Multitude's financial position at the Group level is somewhat limited. One way to look at the group's financial situation is to compare the net equity ratio (Q3'24: 23.4 %) with the required level of the bond covenants (18.0 %), where there are still clear buffers.

The notes will mature in 2035 but are callable by the issuer prior to maturity. The notes were priced at 99% of their aggregate principal amount and the coupon will be 3-month Euribor plus a margin of 11.0%. The cost of the notes seems rather high to us. Given the company's return on capital (2024e ROE-% 9%), we're a bit skeptical that financing growth with this expensive capital is value-creating. We will most likely hear more about the rationale behind the offer when the company reports its Q4 figures on April 3.