Multitude SE
XETRA:FRU
Earnings Call Analysis
Q4-2023 Analysis
Multitude SE
The company has continued to fine-tune its strategy by intensifying focus on core markets which led to a forfeit of EUR 4.5 million in revenue from discontinued markets, emphasizing on the actual economic growth within continuing operations. Consequently, revenue increased by 4.3%, up EUR 7.9 million, with actual growth in operating markets exceeding 6.5% or more than EUR 12 million, which demonstrates a noteworthy trajectory for the company. EBIT, a measure of a company's profitability, has shown a strong performance, marked by a 10% increase, from EUR 53.7 million to almost EUR 60 million.
Revenue performance in the SweepBank segment was particularly stellar with top-line growth surging by 44%, reaching revenues of EUR 23 million. Emphasis on consumer lending portfolios with higher rewards risk pattern has led to a consistent improvement in credit loss performance over the year. The SweepBank unit is committed to nearing a break-even EBIT, with a current negative contribution of EUR 15.3 million, improved from EUR 21 million. CapitalBox also saw significant revenue enhancement, with a 15.4% uplift, reaching EUR 24.7 million. The focus for CapitalBox will involve dynamic top-line growth management, cautious expenditure, and credit loss balance to steer towards a targeted EUR 10 million EBIT for 2024.
The company has maintained stable asset quality with credit losses relative to the portfolio size around 4% on a quarterly basis. Despite a notable portfolio increase, particularly within the wholesale business, there is an assuredness in maintaining asset health, showcasing the company's capacity to manage credit risks effectively.
As the company expands its reach, it has calibrated the expected higher credit loss with a balanced approach to bring in new customers, a crucial step for sustainable growth. This strategic emphasis on customer growth assures investors of the company's forward-looking approach to market expansion.
Acknowledging the vast funding gap faced by SMEs in Europe, the company sees potential for significant market share increase in this sector. With 25 million SMEs struggling to secure funding in Europe, the company anticipates that even with a stable market share, there would be inherent business growth. However, the ambition extends beyond stability, targeting a substantial boost in market share, indicative of a robust growth strategy.
With a solid cash position in anticipation of the expected growth in both the wholesale and CapitalBox businesses, the company positions itself for financial flexibility. This financial strength is crucial, particularly for potential mergers and acquisitions, signaling strategic foresight in preparing the company for opportunistic expansion and consolidation.
In Q4, approximately EUR 3.2 million worth of operational expenses were reclassified as credit losses, resulting in a more accurate representation of EUR 24 million in that quarter's credit losses. Although there was a notable increase in credit losses due to this reclassification, the company's credit performance remains close to the prior quarters, endorsing the company's prudent risk management strategies.
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Good morning, and warm welcome to the Multitude 2023 Preliminary Results Earnings Call. Today, we will hear a presentation regarding 2023 preliminary results by CEO, Jorma Jokela; and CFO, Bernd Egger. We also have Chief Strategy and IR Officer, Lasse Makela, will be available on the call. Afterwards, there will be a question-and-answer session. You can ask your questions in person via audio line or place your questions in the chat.I would now like to hand over to Multitude's CEO, Jorma Jokela. Please go ahead, Jorma.
Thanks for you, and hello, everyone. So my name is Jorma Jokela, the CEO and the Founder of Multitude. And today, I will take you through Multitude's preliminary results for the year of 2023, alongside my colleague, our CFO, Mr. Bernd Egger. I have to say that I'm so thrilled to share that our success story continues strong again.Today, our call is to leave all of you 6 key takeaways. First one, we reached our guidance. Second, our revenue increased by 8.5%. Net profit increased by 39.6%. Earnings per share increased by 34.2%. Our cash position stays strong. And the last one, the Board of Directors proposed a dividend of EUR 0.19 per share according to our target dividend payout ratio, what we [ public ] on the last year Capital Markets Day. Good.So we hold an impressive 19-year track record of establishing a successful and profitable global feedback, focused on helping customers, who are overlooked by traditional banks with amazing and fully digital customer experience. Originating from Scandinavia in Finland with a full [ EU-wide ] banking license and listing on the Frankfurt Stock Exchange in the prime standard.Today, our operation is across 3 business units or tribes how we call them, collectively serving more than 400,000 customers across 16 countries with over 700 colleagues. So Multitude people's inspiration comes from our vision to change the world to build the most valuable financial platform, give amazing experience for customers, who are often overlooked by other banks. We want to democratize financial service through digitalization, making them fast, easy and green. And by the way, this is where all our product logic [ place ] as well.We want to build something unique and or extraordinary something, where everyone can be proud of. Our fintech fraud platform is designed around the idea that Multitude serve as a core platform, hosting all our scalable components. Different business tribes will benefit strongly from this, and they can focus on improving their own customer experience.Currently, we have got the 3 business tribes operating on the platform, Ferratum, specializing in digital consumer banking; CapitalBox, focusing on digital SME banking; and the newest tribe, we focus the wholesale banking customers under Multitude -- under Multitude Bank brand name. SweepBank, our shopping and mobile banking tribe was integrated into Ferratum and CapitalBox as a product at the end of the last year.On the Multitude platform, our focus is twofold. The first, we are working to enhance scalability across the board. And second, we are constantly on the lookout for the fresh opportunities.We are a true unique fintech company with all our actions guided by ESG principles. All our business tribes contribute to growth and profit, and we are so confident in our superior business model, which has allowed us to guide EBIT, earnings before interest and tax [ size ] 2021 and achieve it each year. At the end of the last year, we decided to take one step further and start to guidance further growing net profit, not just earnings before funding cost and tax. Additionally, we have communicated our target for dividend payout ratio. And lastly, we communicate our dream to build a EUR 1 billion valued company in 5 years.All right. Let's dive into Multitude performance for the last year. So we have seen consistent growth in both EBIT and revenue over multiple consecutive quarters. All business tribes have delivered a solid performance. Current market situation is purposely supporting our business initiatives in several ways. Credit demand and payment behavior remained strong and the ongoing trend of digitalization along with investment in the AI industry is pushing us even further. New customer segments are entering in the market, and our target addressable market is expanding as the number of banks struggle to serve their customers well.When we're looking ahead, we have a clear key focus: first aim to further improve scalability through multiple actions; second, we are committed to deliver profitable growth through 3 main initiatives, organic growth, partnership and acquisition; and lastly, we are working on building strategic value through our growth platform. But most importantly, we will confirm our EBIT guidance for 2024, aiming to deliver EUR 67.5 million earnings before interest and tax, what is again around 50% growth from previous year. Good.Let's take a closer look at Ferratum business. So revenue increased by 4.3% and EBIT by 10%, which is a really strong performance. This is thanks to hard work of our team, who have been the dedicated to improve our digital marketing and customer onboarding process. We made strategic shift last year, focusing on offering digital credit in core markets and stepping back from several non-European ones.When we analyze our 2023 numbers, it's important to remember that we compensate for the revenue loss from the market we exited by increasing revenue in the European markets. Last year, we were busy with many technology, and customer journey development, including implementing new AI tools. Our priorities also include improving our collection and credit risk technology, along with enhancing the process and -- along and enhancing our process to ensure the credit loss performance over time.When we're looking ahead, we are focusing on integrating SweepBank account and card products in the Ferratum customer offering. We aim to accelerate to deliver our profitable growth through organic growth, partnership and acquisition. We will improve our scalability through automatization, data and AI and risk initiatives. Our target addressable market is huge, EUR 24.9 billion, and our share is only 2.3%. So we have a significant runway ahead to grow our business. And we want to confirm Ferratum financial targets for the year 2024 to deliver over 5% EBIT growth.Let's dive in the CapitalBox business. Over the past 2 years, CapitalBox has achieved a real turnaround, getting back on track with the growth and profit. Revenue increased by 15.4% and EBIT [ grow ] by EUR 2.7 million. We successfully expand our sales distribution channels, improve digital marketing performance. We launched a new secure lending product and further automated customer onboarding process.So we have been quite busy and successfully last year and a big thanks go to our amazing team. We saw huge opportunities to further improve the digitalization of SME banking. Our target addressable market is substantial EUR 14.8 billion, and our share is only 1%. So we have a significant runway ahead to grow our business.Looking ahead, we are focusing on integrating the SweepBank account and card products in the CapitalBox customer offering. We aim to accelerate to deliver to our profitable growth through organic growth, partnership and acquisition. We will improve our scalability through automatization, data and AI and risk initiatives.In Q1 of this year, we announced our latest acquisition, Omniveta, where we will gain the talented team and state-of-art factoring technology for our product portfolio. Naturally, the next step involves the scaling it in Denmark and later in all our countries. We want to confirm our targets for this year 2024 to achieve the EUR 10 million in earnings before interest and tax.Last year was important one for SweepBank. We made many technology, and customer experience improvement to our mobile banking and shopping app, and we gained a lot of new happy customers. At the end of the year, we decided to integrate it as a part of Ferratum and CapitalBox tribe, as a product for actively cross-selling to customers. On the tribe level, last year, revenue grew by 44% and EBIT improved by EUR 5.8 million.The wholesale banking secure [ debt ] product played a significant role in this growth, as we stabilize prime lending portfolio sales and end of the year, transferred it to Ferratum. In the future, we will report SweepBank activity and performance as a part of other tribes and the wholesale tribe will start to be reported as independent new tribe.But when we look to wholesale tribe, we have 2 main products. The first is secure debt, where we offer refinancing options for non-bank lenders, fintech and other selected customer segments often overlooked by traditional banks. All our lending is collateralized, and we utilize the Multitude platform technology and data.Our second product is a real-time payment solution for fintech, e-money companies and other banks that required a large number of fast and efficient payments across the Europe in various countries. Originally, we're developing this payment platform for internal use only. But it turned out to be so effective and powerful that many partners ask to use it and that's leading us to decide to offer it external as well. We have recruited a CEO for this tribe, and he will start his role later on this year. Good.Last year, we launched our ESG value chain, which demonstrates how our business deliver a positive impact to our society, customers and other stakeholders. And as part of our ESG program, we have set our call for each ESG elements to achieve by 2025, which you can see on the left side of this slide or dashboard.On the right side, you will find our key ESG actions for the year 2023. We have disclosed our Scope 2 and 3 emissions and have set very ambitious targets. We have also committed a partnership for carbon accounting financial to better align with the industry on measuring [ finance that ] emissions under the Scope 3. Our customer happiness and responsible lending index score remains strong. The eNPS score improved [ from 19 to our target of 25 ] by end of the last year, driven by multiple initiatives, including the recent wellness training for employees.We continue to strive to further improve Group diversity. ESG [indiscernible] itself is integrated into our wholesale banking underwriting and customer process, and we are looking to expand this even further. Several actions under CSRD preparation were already delivered last year and preparation will naturally [come to an end ] during this year as well.Now I would like to extend the big thank you for this incredible last year to all of you. And with that said, I will now hand over to Bernd, who will [ revolve ] us through the financial performance. Go ahead, Bernd.
Thank you very much, Jorma. Good morning to you all, and many thanks for your interest in Multitude's earnings call covering the preliminary results of '23 for Multitude Group. I will present to you some more details on the financial performance, key financial and balance sheet metrics. I will give you, as always, I would like to say based on asset quality, we'll update you on funding and cash and also give a little bit of information on new reporting format and policies applied, as per end of 2023.On the next slide, to start off with P&L. And as indicated, please note that from now on, we're presenting the primary financial segments of P&L, balance sheet and cash flow statement in the format and structure that is commonly used in financial industry. So essentially for regulated fintech, as Multitude Group is this is -- in [ DoD ] the best way to present the financials going forward.The key messages on P&L, the financial performance for '23 can be described as very positive in this challenging environment. For the third full financial year in a row now, we have lived up to this to our targets and have achieved our capital market guidance. You will recall or some of you might recall that we have issued the EUR 20 million guidance for 2021, EUR 30 million EBIT guidance for 2022, both achieved now increasing another 50% from the '22 guidance to EUR 45 million in '23, also achieved per preliminary results.Let's go into the details, performance metrics, key performance metrics present themselves as follows: revenue, plus EUR 18 million compared to last year. It's quite a significant uptick in our growth dynamic. This is equivalent to a top line growth of 8.5%. Jorma already given a little bit of a hint that in order to compare like-for-like, we actually should take into consideration also revenues from discontinued markets, which we still have on the P&L in '22, but not in '23 anymore, which is delta of some EUR 4.5 million in '23. So factoring that in revenue growth is economically actually in the region of EUR 22 million, which is a 10% economic revenue growth. And we think that double-digit top line growth is quite strong, if not a very strong performance.Credit loss impairments also in quite good shape with a little bit of an increase in Q4, but a very strong overall performance. Full year increase is equivalent to EUR 4.7 million compared to last year, an increase of 5.4%. Again, on accounting policies, please note that we are [ following ] new reporting policy here according to which variable collection costs are being presented as part of expected credit losses going forward. This means that we are reclassifying EUR 3.2 million completion cost to credit loss impairment. Please note that the classification topic only has no impact, [ also has on ] P&L bottom line.Important to note from our view is that credit losses are behaving [ aggressively ], so that means that they are increasing at a lower pace than both portfolio size and revenue. And again, this is a quite satisfactory result given the somewhat challenging market circumstances in which we've been operating throughout the year.Cost management worked very well during 2023. Personnel expenses not only behaving [ aggressively ], but actually on exactly the same level as in 2022, flat at slightly above EUR 34 million. Operational expenses, general and operating expenses, including marketing and depreciation, other expenses, those movements are largely neutralizing each other in its totality with regards to operational expenses. This means that the relevant expense items, excluding credit losses are mostly on the same level or are growing at a very lower rate, low rate means significantly below inflation rate.On the [indiscernible] basis, these 3 factors -- there are 3 factors to be considered when determining and analyzing cost development, which is true for '23, but also a particular relevance for '24. That is on the one hand side, the efficiency gains from automation and establishing a lean and scalable organization. This is at the core of our initiatives throughout '23, but also 24, and we've made considerable progress when it comes to making use and realizing efficiency gain.Secondly, cost pressure from inflation. You are familiar with that. This is not something that we can distance ourselves from. This has obviously an impact on our P&L as well. In '23, we have managed very well to offset these cost pressures by efficiency gains.And finally, investment in future growth, so it's always easy to keep cost low. At the same time, we are dedicated to perform better, to increase top line and that requires some sort of investment in both CapEx, but also expenses, operational expenses in future growth. And these 3 factors are what we have tried to balance throughout the year '24, but for '23, I would like to highlight that this balancing act has worked extremely well.Financing expenses, this is something we definitely need to highlight. You all are familiar with the interest rate environment and the significant increases in reference rate during the course of 2023. Financing expenses '23 compared to '22, increasing by some 58%. Key drivers are volume increase. So we will round about EUR 110 million higher portfolio and investment size compared to '22. Secondly, cash balances end of '23 are higher by [ similar ] EUR 30 million compared to '22. This is important as it is enabling us to meet our growth expectations for 2024. And of course, significantly higher reference rates.Deposits are the key cost factor, and we will speak about the composition of our funding structure a little bit later. Here, costs are essentially [ saved ] by deposit protection scheme by higher rates and longer deposits, longer term deposits, especially in the second half of '23, where we paid up to 4.5% for longer maturities. On a positive note, since then, pricing for new term deposits have reduced by [ 30% ]. So compared to end of year, meanwhile that reduced the rates we pay for new [ 24 ] and 36-month deposits by 30%.Now other than these developments in revenue, cost and credit risk and operational expenses and finally, financial expenses translate into profitability. It is that Jorma pointed out, a very strong EUR 45.6 million, which is, by the way, the new all-time high for Multitude's history. This is equivalent to an increase of 44.4%. The capital markets guidance I pointed this already achieved for the third time in a row 50% [that of ] year-on-year.Profit before tax, EUR 19 million. Certainly, this is impacted by a significantly higher financing expenses, but also offset by an excellent operational performance, especially also during Q4.Tax expenses, EUR 2.55 million. This is equivalent to an effective tax rate of 13.4% same level as last year. And finally, net profit up by 40% to EUR 16.4 million.Let's move on to the balance sheet. On the asset side, there's not too much to focus on. In fact, the assets are obviously reflecting business growth and the strategy that we are delivering upon. We see an increase in the loan book [ up ] EUR 70 million increase or growth by [ 30.6% ]. The investment business, this is really something that we are focusing on significantly. So that is essentially the wholesale business with the beauty that is essentially collateralized business has tripled during 2023 from a little bit more than EUR 20 million to EUR 62.1 million. And as pointed out already, the cash -- we've increased the cash resources quite significantly.Moving on to equity and liability, talking about liability first, deposits main source of funding, deposit base at EUR 730 million, as already highlighted, the rationale behind that. Equity increasing to a little bit less than EUR 184 million. So we have a very solid equity base. Relevant factors for this year for '23, significant net profit, obviously also interest paid to the [indiscernible] bondholders. We have bought back some [ 5 million ] from perpetual bonds, as we wanted to make use of the attractive price for us, via attractive pricing. We've seen during the year, and meanwhile, prices have increased quite significantly with greater dividend and that is shaping the EUR 184 million equity for the year.Let's move on and talk a little bit about the performance on the business unit of [ 5 ] level and let us as always start with Ferratum. I pointed this out throughout the year, I can only reiterate that. Ferratum has been performing very well. It shows growth. It shows excellent scalability, and it shows a high level of resilience. This is reflected in the numbers as follows: revenue up EUR 7.9 million or 4.3%.Again, taking into consideration the fact that in '23, we have moved forward and accelerate actually the process of focusing on core markets, which means we have lost [ EUR 4.5 million ] [indiscernible] or [ EUR 4.5 million ] comparative revenue from discontinuous market. This means that in the market in which Ferratum is operating now, the actual economic increase in revenue is actually more than EUR 12 million or 6.5%.Credit loss impairments, essentially growing in line with top lines, were pretty well on track. High scalability is demonstrated by -- in the end, [ the flat ] overall cost development and EBIT increasing from already very strong EUR 53.7 million to almost EUR 60 million to this EUR 9.1 million, an increase of EUR 5.4 million or 10%. So really excellent performance [indiscernible].I would like to continue with Sweep, we are quite satisfied with the revenues performance. We see a top line growth of impressive 44%, driving revenues up to EUR 23 million, so already quite significant. Still, there's a lot of potential, but already quite significant in 23.Credit losses is also something I've highlighted during the year, we were [ not ] perfectly fine with credit loss performance during 2023, but we see gradual improvements during the year. So the trend is actually quite okay.Actions have been taken in order to get us closer to the credit loss levels that we want to achieve on the one hand side by focusing on consumer lending portfolios that are showing a significantly high reward risk pattern. As Jorma pointed out, the whole consumer lending business, by the way, will be consolidated in the segment consumer lending from Q1 onwards.In addition, the competition of the portfolio has changed. So that the growth in this segment is driven by the collateralized, securitized wholesale business, which helps us a lot to -- help us a lot already during '23 to improve credit loss performance very significantly.Cost in SweepBank, we've taken a lot of action has reduced cost base quite significantly in Q4, started investing in driving up the wholesale business. Obviously, the overall cost development very well on track. And as a consequence of all that, the negative EBIT contribution in Sweep has reduced substantially. We have the ambition of getting as close as we can to EUR 10 million with minus EUR 15.3 million. We're not there yet, but the trend has improved significantly. So from minus EUR 21 million to minus EUR 15 million by significant improvement. So going in the right direction.Let me conclude the review of the business units with CapitalBox, revenue up to EUR 24.7 million. This is a significant increase of 15.4%. So what we are seeing here is really significantly accelerated growth top line going up quite dynamically.Credit loss performance somewhat increased during Q4, but this is also a function of accelerated growth. Full year credit loss performance is still very good, 26.7% credit losses of revenue is actually better than expected 2023 performance. A lot of emphasis has been put on cost management in CapitalBox '23, all of that very thorough and [indiscernible] 29:37 cost management, credit loss performance and dynamic top line development is reflected in a positive EBIT for the full year. EBIT improved EUR 30.7 million from [ minus 1 to plus 1.7 ].It's not so much only the absolute number, but the fact that we have turned around the business that gives us a lot of comfort that we are on track to get to EUR 10 million. This is the level of EBIT that is the level that in an ideal scenario, we want to achieve for CapitalBox in 2024. The key challenges in getting us there is obviously, again, to maintain accelerated growth to continue with a very conservative and cautious cost development and at the same time, balance credit losses.Next slide, asset quality. You're familiar with this slide, nonetheless, showing it again since there is a key message that can be derived very easily. Key message here is that the asset quality is very stable. Credit losses relative to portfolio size are in the region of 4% on a quarterly level, very stable, very solid, very high level of resilience throughout the last couple of years.Next slide, cash position with increase on a consolidated level on cash quite significantly, while I pointed to that already to give us room to move in terms of portfolio growth, but also to make [indiscernible] to consider M&A transactions going forward.Funding structure, also pretty easy to summarize what the status is. We currently actually do have a target structure in place. We are focusing, concentrating on deposit funding with some activities in the capital markets. During '23, we have decided not to close the transaction, but to wait a bit to see whether market circumstances, the receptiveness of the market would improve in 2024. Currently, there are a number of indicators, giving us the impression that market circumstances actually have improved since last year. This is why we are currently considering either going to market with a Tier 2 transaction on the level of the bank or doing a [ staff ] issue on holdco level in the course of spring 2024. Good.I do hope you found this update of interest. Many thanks for listening. Jorma, back to you.
Good. Thanks, Bernd. That was really good. That was really good. And I think I want to leave all of you those same key takeaways what I want to leave in the beginning of our call. So we reached our guidance. The revenue increased 8.5%. Profit -- net profit increased 39.6%. Earning per shares increased 34.2%. We held strong -- we hold a strong cash position. And the Board of Directors proposed the dividend of the EUR 0.19 per share according to our last year Capital Markets Day, the targets. Good.I think we are open for the question [indiscernible].
[Operator Instructions] So we're looking forward to the questions and move on with Marius.
Yes. I hope, you can hear me? First question, I would have is, can you please guide us a little bit through your CapitalBox guidance of EUR 10 million EBIT, what is the underlying assumption for that. I mean, that's more than [indiscernible] of your 2023 EBIT. And even with a much stronger top line, it is, I am [ curious why ] ambitious honestly?And the second question would be with regard to the maturities of your [indiscernible] portfolio and especially for your deposits. How fast would lower general interest rates affect this deposit portfolio and how [ fastly ] should expect if interest rates decrease again?
Thanks, Marius, and nice to hear you. Maybe, Bernd, if I take the first question and maybe you can help the second question there about the deposit portfolio. The portfolio, the -- how it's splitting and how quickly it's impact for us.When we look in the CapitalBox, we have gone through the last 2 years a quite significant turnaround there and the business is fundamental. We have not increased any new countries there. So our assumption was being that we want to sell into more in our current customers, and we want to sell into more into countries, where we are today. So our assumption has been mainly to expand the product portfolio and increase the share of the wallet from the customers in -- SME customers in the countries and the markets, where we already today are.So that was our strategy in the last 2 years. So we did not open new countries there. We only focus the countries, to improve the process, improve the automatization there, an idea was that all under EUR 50,000 loan origination, we can test a purely automated. And then everything above that one, it's still the major part is automated, but that we can -- but we want to do the some manual control process behind there.When we look in the assumption on the EUR 10 million EBIT, we don't need the new countries on that as well. So we -- our assumption is that we can deliver on the new product in. So it's mainly -- it's we launched in the last year, the secure lending there. So we have approximately today the -- our installment loan, the working capital installment loan. We have a credit facility there. We have, buy now, pay later type of the product like the sales finance product there. So those are the products what we have it today there, then -- and the secure loan as well. And the nearest on the secure loan, we definitely want to increase. So that's one of the key drivers behind there. The sales finance is very early stage there as well. So we want to go into much, much further that as well.Factoring product, thanks to this Omniveta acquisition now on the -- from Denmark, it gives us a totally new revenue -- new product in our portfolio. So it will be help us that as well. So the sales part distribution, it's more the coming in the multiple products. So this is one of the key assumptions there.The profitability point of view, we see that in the cost base, we can control this relatively well there. Then of course, the credit loss, it's a credit loss part. It's very important, especially when you're opening the new product and new customer segment and when you have to grow that really fast. And typically, it's when you can only selling into old customers, your credit loss is much easier to control because you have more data from the customer.When you're entering the new customer segments, you have to take more risk before you learn there, but it's typically it's more like a period was going to over there. So you have to have the patient waiting and see the real profitability through that one. So our assumption behind there is as well that we managed to get through on this new customer flow, the higher credit loss in that period as well. So this is the more or less our main assumption.So distribution and the product part, no, any new countries there. And then it's that we can get it through this credit performance cycles when you get a lot of new customers in there. I don't know, Bernd, do you want to add something more in the CapitalBox.
Well, maybe just 2 fundamental statements and those who have listened also in the past now that I am a big supporter of CapitalBox not only from a financial potential perspective, but also from a strategic perspective. We're talking about the growing market yet. So we are making contribution to closing the funding gap for SMEs. There are 25 million SMEs in Europe that find it hard to get funding and the funding need is great. So even with a stable market share, business would actually grow. Naturally, our ambition is not to keep our market share stable, but to increase it quite significantly. So from that perspective, we are quite optimistic, as regards to growth on CapitalBox.On -- if I may continue with Marius [indiscernible] question [indiscernible] deposit structure and for us interest rate environment impact deposit pricing going forward [ in turns ] and financial expenses. I mean, I think what you're indicating is that there is an element of stickiness with longer-term instruments, and that's certainly right. So we currently hold round about 1/3, a little bit more than 1/3 to 35% in term deposits, in deposit instruments with a longer material -- residual maturity is longer than 12 months. This means, of course, that there's a timing effect both when it comes to increasing interest cost, but also decreasing.We see that in -- we've seen it in '24 -- sorry, '23 towards the end of the year with this average cost of deposits, 3.5% beginning of the year, this was still slightly below 2%, so quite a significant increase. Now we have reduced a couple of months ago, we have paid 4.5% for 36 months money. Now, we are paying 3% for new deposits. And we will see a similar time lag effect when it comes to anticipating the cost for 2024. But we didn't expect the ability to reduce costs significantly.So when -- would you have asked me 3 months ago, whether we think that we can reduce term deposit pricing by 30%, I wouldn't have anticipated that. So from that perspective, I'm quite optimistic that those 2 factors will ideally net off.
Sorry, Jorma. So now we will move on with the questions from Philipp.
I have 3 questions, please. Firstly, on the financial result in Q4, that was relatively high with around EUR 9 million. Maybe you could elaborate a little bit on the outlook for the current year. What do you see as a realistic quarterly run rate?Then secondly, related to this somewhat, it's the cash position, which was very, or which has gone up quite significantly by EUR 80 million quarter-on-quarter to EUR 284 million. Maybe you could explain a little bit the rationale about this strong increase? And how do you see the development for the current year?And last but not least, on Q4, I mean, it was kind of tricky to calculate Q4 figures because of the accounting change, but revenues, the EUR 63 million should be probably the right figure. Can you comment why there was such a strong increase year-on-year, quarter-on-quarter?And also in risk provisions, the EUR 28 million, which I calculated maybe you can confirm this figure. This is probably partially related to a strong increase due to the accounting change, but even if adjusting for this, there was quite a significant increase. Maybe you could also comment on this?
Thanks, Philipp. I think maybe Bernd, I want to hand over for you those all 3 -- 3 questions exactly.
Yes, [ if we can ] as always. Maybe starting with the last one. Your calculation is the factor I said, almost price is EUR 27 million [ roundabout ] is the credit loss level in Q4. And as you rightfully concluded, this is 50% of that is driven by the reclassification of operational expenses into credit losses [ EUR 3.2 million out of some EUR 6 million, EUR 7 million ] increase in comparison to the average of the first 3 quarters. So economically, EUR 3.2 million would have to be deducted. It brings us to EUR 24 million, which is much closer to the previous quarter's performance, which were 2021 in this region.Still, it is on a high level. The reason for that is that we have accelerated growth in -- especially in CapitalBox. You've seen also over the last couple of years in CapitalBox, there's always a little bit of volatility when it comes to credit losses being more aggressive in the market also means that we sometimes have to incur higher credit losses, and this is what we need to balance going forward.Same for Ferratum, slightly higher credit losses in Q4. Market circumstances are still challenging. So from that perspective, still pretty okay, the credit loss performance also in Q4.Revenue, Q3 EUR 63 million. Two factors impact from classification is [ roundabout ] EUR 1 million. So one could adjust for that brings us to a little bit more than [ EUR 62 million ], which is still quite significantly above previous quarters. This is higher than growth dynamics. I mean, we are seeing quite significant growth in these -- in the current SweepBank segment, but the key driver here is wholesale. We have tripled the portfolio, the investment portfolio to more than EUR 60 million. That is a key driver, #1. Key driver #2, very dynamic loan disbursement in CapitalBox started in Q4. So those are the key drivers behind the revenue growth.Then there were 2 questions on funding costs and cash position, maybe starting with the cash position. Yes, you're absolutely right. We've increased the cash position quite significantly to make sure that for a quite significant expected and that's not the guidance. It's just an explanation on why we have sufficient cash, expected growth in the wholesale business and in CapitalBox business, we have sufficient cash resources at hand. And also, that we have flexibility, especially on the level of the bank when it comes to M&A opportunities.I have to say we have, in order to protect, and this is the bridge now to balance expenses. We've decided in the second half of '23 notes to go to market with a Tier 2 transaction for bank and have provided the bank with corporate cash with holdco cash, so done quite actually a lot to make sure that the credit -- the finance expenses don't go up too much. EUR 9 million is the level we had in Q4 finance expenses.Exactly 1 year ago, the question was raised to me what is sustainable level for '23. Could be back then, my answer was in the region of EUR 6 million to EUR 7 million on a quarterly level, provided that interest rates don't go up too much. This was exactly, where we landed with a slightly higher level in '20 -- in Q4.So the question, [ take the question ] is last year, what announcement could be? I'm still a little bit hesitant to give guidance on the level of cost components. Same as with Marius' [ full month ] question. We need to take into consideration the higher cost or deposits will stay for a while. So we -- it's not realistic that we go back to the EUR 6 million, EUR 7 million per quarter level. Obviously, we try to keep it as low as possible. And as I said, we have started reducing relative prices again.Maybe I continue since I noticed that there is another question. What is the current interest, if I may, Jorma?
Yes. I just wonder, Philipp, are you okay? It's or any follow-up questions. Good. Good. Then, I'll proceed with question raised by Stefan [indiscernible]. As this also relates to deposits, what are the current interest rate levels for deposits overnight, 1-year fixed, 3-year fixed.Overnight still was 40 basis points. And quite interestingly, I find it interesting. We have not changed that during the year. So this is where we really wanted to manage and see how the reaction, the inflow and outflow actually work provided we keep rates constant. We've done that throughout the year, '23 and still, we're at 140 basis points for overnight money. We are -- currently for 1-year money, we're at the level of [ 2.3 ] for 2 years, slightly above [ 3, so 3.10 ] and it's even a little bit less [ 3.0 ] for 3 years money. And again, just for comparative purposes, the rates were [ 450 ], 4 months ago. So -- but this is the 30% reduction I was referring to.Good. Good. And then there is question. There is a next question from [indiscernible] about could you elaborate more on your thinking of why you want to move the official headquarter to Switzerland.Maybe I can just shortly comment on that part, it's -- this whole exercise is starting only like several years back when we start to looking for to relocate our headquarter in the German. And the thinking process behind there, why we want to relocate it was that we have had since our IPO in the 2015, so 9 years back, we have had a few technical challenge, what we have tried to solve over the last 9 years.And the first one is that in Finland, we have like a special legislation that when you have it -- when you hold the Finnish passport or that you are the Finish investment company, the all shares have to hold in one particular -- in the Euroclear system in the Finland. And then, the Frankfurt Stock exchange is working in the other system. And every time when we have a shareholder meet, AGM or the -- some voting, so these shares have to transferred back [ and forth ] and it's quite expensive and it's very time consuming. And we have appropriately blocked out totally to Finish investor community [ to investment ] our shares, and we have a waiting to solution that one.And currently, we have -- there is a few solution. The one solution is a dual listing in the Helsinki and the second one is relocated the headquarter, and we [ chose ] to relocate the headquarter. And what this will benefit for us, it will be increase our liquidity, it's increase our investor and shareholder base there as well. And then the question is where we want to relocate it. And then we look in the different location. And I mean, we have a management or, we have a management are also located in the Central Europe as well, and then we pick up the Switzerland, as a location there. So that is the more or less like a thinking process behind there.Good. I think we are end of our chat. There is no many -- any more questions. Did we have an audio question left?
No, Jorma. Not anymore.
Okay. But hey, then I think we are done, and we want to really, really address our big thanks for the -- our team, our stakeholders, our investors from the amazing last year. I think we should be proud all of us on the last year, and this year, we will do it even better there. We are just [ speaking you ] of our story. Thanks, everybody. Bye-bye.
Thank you.
Thank you, everyone, for joining the call. This concludes our call for today. So thank you, and goodbye. Goodbye.