Judo Bank shares surge on FY result
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More news: Judo Bank shares surged on its full-year result, opening nearly 10% higher before settling back 8.3% to $1.50 by 11:23am AEST.
ECP Asset Management’s Andrew Dale said Judo delivered a really solid result with strong loan book growth and a better than expected net interest margin.
“The strong culture that the bank has developed combined with a focus on customer relationships and credit management in the SME space will help them achieve further growth into FY25 despite economic uncertainties out there,” he said.
Jefferies said the second half cash profit of $29 million was slightly above consensus although down 37% half on half. Its full-year core profit of $86 million was notably higher than Jefferies and market consensus.
The result also continued a positive trend in the bank’s share price to book which is now just under 1x compared with a low of 0.6x in late 2023.
Credit stress emerging for Judo Bank
The news: Judo Bank delivered a slightly better than expected full-year results with underlying profit before tax rising 2% to $110.1 million while non-recurring costs of $5.8 million saw statutory profit fall 3% to $104.3 million.
The numbers: Lending grew 20% to $10.7 billion while margins fell 35 basis points to 2.94%. Lending, gross loans and advances came in at the top end of the bank’s guidance, and while margins fell Judo said the result was better than expected.
At 55% the cost to income ratio was flat however Judo’s return on equity of 4.5% remains well below the cost of capital.
While the average portfolio credit risk grade remained stable at 7.07 impairment expenses rose 28% to $70.1 million and loans 90 days or more past due more than doubled to 2.31% from 1.09%, although that figure improved in the second half. Write-offs of $30.9 million for the year represented 13 customers.
The context: The first result under new CEO Chris Bayliss who replaced founder Joe Healy earlier this year saw continued steady development of the five year old bank’s strategy to focus on lending to the small to medium-sized business sector.
Bayliss said in the release a “structural shift from consumer-led to business-led economy is underway, with businesses investing to drive productivity to offset continued cost pressures”.
He said the disproportionate benefits Judo received during Covid via cheap funding so it could continue to support the SME sector had now largely washed through and “strong underlying operating leverage” would now drive results. Strong lending with slower cost growth should improve the cost-to-income ratio.
“Our core SME lending franchise is performing well, and our significant balance sheet creates more optionality,” Bayliss said.
He added the bank had an expanding presence in the regions, looking at adjacent products and segments; a move to strategic, scalable technology platforms was largely complete, underpinning operating leverage; and Judo had strong capital and funding.
Judo has been one of the more volatile stocks in the financial services sector although through the spikes and dips has been a steady increase in the share price over six months from $1.20 to $1.38 at yesterday’s close.
The source: Judo media release
