Judo Bank shares gain as UBS initiates coverage with 'buy' rating
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The news: Shares in Judo Capital Holdings rose on the ASX after UBS initiated coverage of the bank with a 'buy' rating.
The numbers: Judo shares were up 2.7% to $1.71 by 11:50am AEDT, having added more than 70% since January. The wider financial sector fell 0.41%.
UBS initiated its coverage of Judo with a $2.10 price target, offering a 25% upside to current market levels.
UBS analysts expect Judo to achieve the top end of its "at scale" guidance by FY29, with an expected return on equity of 10.9%, something they believe the market "has not fully priced in".
They noted that Judo's lending book could double in the next four years to around $20 billion, based on a projected 15% three-year compound annual growth rate in lending.
The context: The analysts said Judo has carved out a "credible niche" in a highly competitive banking sector characterised by the incumbency of the majors.
Judo's ambitions to scale are likely to supported by structural drivers within the broader business banking market, they said, and further commercial broker channel penetration.
The source: UBS research
