Judo Capital shares surge on 70% rise in half-year profit
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The news: Judo Capital Holdings, owner and operator of Judo Bank, was among the top performing stocks across the ASX 200 after reporting a 70% leap in first-half net profit.
The numbers: Judo shares were up 11.1% to $2.15 at 12:25pm AEDT, extending gains of around 80% over the last 12 months.
Judo reported first-half net profit after tax of $40.9 million, rising from $24 million in the prior corresponding period.
Net interest margin (NIM) of 2.81% fell by 4 basis points but remained in line with guidance.
Judo also upgraded its second-half and full-year NIM guidance to the top end of their existing ranges, supported by strong lending margins and close management of liquidity.
The bank now expects second-half NIM at the upper end of its 2.9% to 3% range, and June 2025 NIM to reach 3%.
The context: Macquarie analysts said Judo's headline result was ahead of consensus estimates and supported by lower impairments. However, on a pre-provision basis, they noted, the results were "a touch weaker than expectations", with a slight miss to estimates on volumes and margins.
The analysts believe Judo can achieve its target of 15% growth in profit before tax, with strong lending margins and favourable macro conditions, with likely rate cuts further supporting the environment in the near term.
UBS analysts said Judo should continue to benefit from an improvement in funding mix, with deposits targeted at 70% of total funded assets, and with the group aiming for NIM 3% by June.
What they said: "The investment case hinges on the ability to continue to scale and show the market proof points around its operating leverage, while balancing lending growth and credit risk through this process," the UBS analysts said.
"If successful, we believe the valuation is cheap."
The sources: ASX announcement, UBS research, Macquarie research
