Judo Capital Holdings Limited · ASX:JDO
Judo Capital — FY2023 Earnings Presentation
43 slides from Judo Capital's earnings presentation, Aug 24, 2023
Slide 1: Boldly backing business
bank Boldly backing business y ae mca Apa 4 eigaaar
Slide 2: Agenda
— Agenda Topic Presenter CEO Update Joseph Healy CFO Update Andrew Leslie Conclusion and Outlook Q&A Joseph Healy Judo management team Judobank 2023 Full Year Result
Slide 3: CEO Update
Judobank C EO Purpose Update. Tobe the most trusted SME business Joseph Healy bank in Australia g Vision To build a world-class SME business bank 2023 Full Year Result
Slide 4: Our purpose: To be the most trusted SME business bank in Australia
Our purpose: To be the most trusted SME business bank in Australia. judobank Judo is a unique, pure-play, specialist SME bank Consistent strategy since day one, based on a clearly defined and sustainable competitive advantage We are successfully executing a clear plan to become a world-class SME bus
Slide 5: Building a World Class Bank
~¢ Building a World Class Bank. judobank Wr World Class 020 (()) Scaling the Bank * Build a world class SME business bank * Achieve metrics at scale and ROE in the low- to mid- teens * Market leading NPS >20 points above avg of majors Or Build the Bank * Embed our unique culture and operating model
Slide 6: Highlights
~» Highlights judobank We are continuing to execute our clear purpose-led strategy * Continued to execute successfully in FY23 delivering GLA growth of 46% and a sevenfold increase in Profit Before Tax to $108m * On track to achieve our metrics at scale and we are now halfway with $9bn GLA * Inheren
Slide 7: FY23 Highlights
~* FY23 Highlights judobank Delivered on FY23 guidance; halfway to metrics at scale with $9bn GLA Metric FY23 result drivers FY23 results FY23 guidance At scale GLA Strong lending growth within risk appetite, driven by our relationship-led customer value proposition ¥$9bn >$9bn $15-20bn Underlying n
Slide 8: We are running our own race
~» We are running our own race. * $3bn or 46% lending growth; 8x system growth * Current market share remains less than 2%! * Established four new locations: Bunbury, Rockhampton, Orange and Albury + Investment in Agri and Health specialisations * 123 bankers and 50 analysts at Jun-23, expected to r
Slide 9: Credit quality remains robust
~ Credit quality remains robust. judobank 90+ DPD and impaired loans increase off an ultra-low base; remain well below sector 90+DPD and Impaired loans — Judo vs sector (% of GLA) oy, Credit quality vs the sector + Judo has 34 out of 3,758 customers in 90+ DPD and impaired 109% 1.22% representing ~1
Slide 10: Prudent collective provisioning
~e Prudent collective provisioning. judobank Judo’s collective provisioning is comparable to the major banks and higher than the regionals Judo collective provision vs peers (% of CRWA)! Judo collective provision coverage (% of GLA) 118% on: 30% higher 090% coverage Judo Peer1 Peer2 Peer3 Peer 4 Pee
Slide 11: Another Black Belt result
n Another Black Belt result. judobank FY23 has been another strong year of execution We remain on track to achieve metrics at scale We are now in horizon two of building a world- class bank, driven by our strong EVP and CVP Asset quality remains robust, well within long-run expectations and below th
Slide 12: Financial Update
Judobank Financial Update. Purpose aa Leslie Tobe the most trusted SME business Chief Financial Officer Q g bank in Australia Vision To build a world-class SME business bank 12 2023 Full Year Result
Slide 13: FY23 Result
—~» FY23 Result. judobank Profit & Loss Statement Income ($m) 353.0 173.0 Operating Expenses ($m) 190.9 132.0 Net Profit Before Impairments ($m) 162.1 41.0 Impairment Expense ($m) 54.6 25.4 Profit Before Tax ($m) 107.5 15.6 GLAs ($bn) 8,908 6,092 46% Underlying NIM (%) 3.53% 2.19% 74 bps CTI (%) 54.
Slide 14: Strong lending growth continues
~ Strong lending growth continues. judobank Judo’s loan book over time ($bn) 8.9 45% 75 61 48 $9.3bn 35 Floating Fixed a Interest Only 26 Expected GLA at Principal & Interest 18 lJ end of August Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 mBusiness Loans mAsset Finance mt Home Loans Line of Cre
Slide 15: Strong Underlying NIM despite competition
~e Strong Underlying NIM despite competition. Underlying NIM' Waterfall - HoH (%) judobank 3.56% (0.19%) 0.13% 3.49% 0.06% (0.17%) (0.07%) Benefit from rate Largely warehouse impact of lower front Lower liquidity, and rises on fixed rate | | balance drawn and | | book lending margins favourable fund
Slide 16: Funding is a strength
~* Funding is a strength. Movement in funding sources ($bn) ) 16 1 6.4 oA 0.3 44 1.5 Jun-22 Dec-22 mSelf-securitisation! m Deposits NCDs mSenior Unsecured TFF amounts shown on chart excludes preserved component of $0.6m 6.0 Jun-23 m Warehouse Debt Hybrid (AT1/Tier 2) judobank FY23 highlights Term de
Slide 17: Transition to longer term funding stack underway
— Transition to longer term funding stack underway. > Transition to longer term funding stack well underway We have grown deposits from 36% to 50% of funding over the past two years Judo has built a strong term deposit franchise and remains confident of sourcing 70-75% of at-scale funding through te
Slide 18: Term deposit margins
~° Term deposit margins. judobank Judo’s channel diversity supports our through-the-cycle assumption for TD margins of 80-90 bps Judo’s hedged margin over 1m BBSW for new term deposits (bps) 100 90 Through-the-cycle assumption of 80-90 bps Market volatility, including offshore bank failures Jon-23 F
Slide 19: Lending margin
~* Lending margin. judobank Lending margins impacted by a variety of factors Headline lending rate up ~1% over 2H23 as loan book (90% floating-rate) has re-priced with 1m BBSW We continue to earn a 50 bps premium compared to other banks for service, speed and judgement We will not charge a loyalty t
Slide 20: NIM outlook
—- NIM outlook. judobank 2024 is a transitional year for funding Beyond FY24 will see progress to at-scale NIM | 7 : || ‘Includes impact | of TFFrefinance + NIM Normalised Warehouse Lending Liquidity Equity NIM Normalising Fundingmix | Higher Product mix Channel mix NIM -FY23 deposit costs debt &oth
Slide 21: Expenses and cost-to-income ratio
• 350.0 90% 76% 300.0 70% 54% • 250.0 50% 200.0 30% 47.0 150.0 10% 24.6 34.1 100.0 -10% • 18.4 50.0 119.3 -30% 79.5 0.0 -50% Employee benefits expense IT expense Other expenses CTI % •
Slide 22: Cost of risk
• • 1.2 0% 1.0 0% 0.8 0% 0.58% 0.6 0% 0.4 0% 0.20% 0.51% 0.2 0% 0.21% 0.15% 0.17% 0.0 0% 0.01%
Slide 23: Provision coverage and impaired loans
200 1.40% • 180 1.21% 1.20% 160 1.04% 1.00% 140 0.92% 0.91% 120 0.80% 5.0 100 0.60% 80 8.4 60 83.7 3.0 0.40% 40 2.5 64.8 50.5 0.20% 20 36.6 18.8 0 5.6 1.7 4.3 0.00% •
Slide 24: Capital
~* Capital. judobank Judo remains well capitalised Significant capital headroom available Strong Jun-23 CET1 ratio at 16.7% remains sector leading + Judo has significant unused capacity to issue additional hybrid securities to supplement total capital and continue Lower risk weighting from revised A
Slide 25: FY24 considerations
~* FY24 considerations. judobank * Wewill continue to grow our loan book within our risk appetite * NIM will reflect repayment of the TFF and transition to our long-term funding model * Cost growth to moderate significantly * Cost of risk to reflect ongoing growth and seasoning of the lending portfo
Slide 26: Conclusion & Outlook
Conclusion & Outlook. Joseph Healy Chief Executive Officer 26 Judobank Purpose Tobe the most trusted SME business bank in Australia Vision To build a world-class SME business bank 2023 Full Year Result
Slide 27: Operating environment
~* Operating environment. SMEs continue to demonstrate their resilience * We expect a soft landing for the economy * However, impact of high interest rates will not be uniform - some sectors will be impacted more than others * SMEs have managed through one of the most challenging operating environme
Slide 28: What has history taught us about loan losses?
~« What has history taught us about loan losses? Analysis of SME loan losses across domestic and international banks over 2001-15 Loan losses are often a result of lending not being properly assessed at the time of origination followed by weak oversight and validation A borrowers’ lack of experience
Slide 29: Credit quality key metrics table
~* Credit quality key metrics table. judobank Arts and Recreation 80% 73% 1.01% 0.90% 2 Transport, Postal and Warehousing 219 245 3% 3% 88% 94% 0.16% - 1 - Retail Trade 565 632 8% 7% 771% 76% 0.95% 2.25% 3 7 Non-Discretionary Retail 353 385 5% 4% 72% 74% 0.76% 2.61% 2 5 Discretionary Retail 212 247
Slide 30: Commercial Real Estate (CRE) lending
~- Commercial Real Estate (CRE) lending. judobank We continue to exercise disciplined lending to CRE > 30 CRE portfolio concentration has reduced to <22% of portfolio Commercial real estate concentration (ARF230) from ~29%. Current concentration is below our internal limits Lending is diversified ac
Slide 31: Accommodation & Food Services, Retail Trade
~- Accommodation & Food Services, Retail Trade. judobank Well diversified and secured, with additional economic overlay A&FS represents 10% of GLA. Majority of borrowers are accommodation and pubs Retail represents 7% of GLA. Largest sub-sectors are non-discretionary categories A&FS and Retail expos
Slide 32: Construction (incl services to Construction)
~¢ Construction (incl services to Construction). judobank Judo does not have a standalone property development book + Judo’s construction exposure (7% of GLA) is primarily Construction sub-sectors (Jun-23) equipment finance (30% of exposure, well secured) and services to construction, secured with r
Slide 33: Manufacturing
~* Manufacturing. Well diversified across 83 sub-sectors Manufacturing ANZSIC consists of 83 sub-sectors Judo’'s portfolio is well diversified across sub sectors, with our largest exposures in food and beverage manufacturing (30% of manufacturing combined) We have limited exposure to energy intensiv
Slide 34: Judo's model works through all parts of the cycle
~» Judo’s model works through all parts of the cycle. {udobank Judo way of banking Low customer-to- banker ratio Early detection of issues Clear arrears management process Individualised approach to resolution Specialist model that incentivises positive customer & shareholder outcomes Experienced ba
Slide 35: Our unique culture is driving sustainable success
~* Our unique culture is driving sustainable success. jugobank Satisfied customers Strong financial performance Highly engaged team * Deep expertise among management and board Credit skills, not sales skills, are a core competency * Ownership mindset underpinned by 8% of issued * Stringent credit te
Slide 36: Significant progress to key business metrics at scale
-° Significant progress to key business metrics at scale. judobank Gross loans & advances Net interest margin Cost to income ratio $15 to 8.9bn 353% 97% 76% 2.794 tox 54% 2.59% eS 6.1bn, 3.5bn FY21 FY22 FY23 At scale FY21 FY22 FY23 At scale FY21 FY22 FY23 At scale Cost of risk Return on equity Low t
Slide 37: Conclusion and FY24 outlook
~- Conclusion and FY24 outlook. We are driven by our vision to be a world class SME business bank Our strategy is unchanged and we are on track to achieve our metrics at scale Our Board and management team are deeply knowledgeable with over 300 years of cumulative business banking experience Periods
Slide 38: Questions
Judobank Questions. Wy f/f f—lIlu
Slide 39: Appendix
Judobank Appendix. Wy f/f f—lIlu
Slide 40: Judo's liquidity portfolio
~¢ Judo’s liquidity portfolio. judobank Considerations + Judo’s liquids portfolio of $3.1bn comprises bonds, floating rate notes and cash Elevated liquids to normalise over time * — Looking forward, liquidity will remain elevated during the TFF repayment period ° As at 30 June 2023, we had $2.3bn of
Slide 41: Judo's hedging strategy
~e Judo’s hedging strategy. AUD $m 8,500 6,500 4,500 2,500 500 1,500 -3,500 -5,500 -7,500 Reflects business lending on floating rates Judo’s reprice gap mmm Assets mmm Liabilities mmm Derivatives ©——Net Largely reflects fixed rate treasury portfolio Oto1month >1up to3 months 23 up to6 months Include
Slide 42: Thank you
Judobank Thank you. Wy f/f f—lIlu
Slide 43: Important information
Judobank Important information. This presentation is provided by Judo Capital Holdings Limited ABN 71 612 862 727 and its controlled entities (variously, "Judo', "us", “we or “our”) and is current at 24 August 2023. Itis information given in summary form only and does not purport to be complete. It