Judo Capital Holdings Limited · ASX:JDO
Judo Capital — H1 2024 Earnings Presentation
36 slides from Judo Capital's earnings presentation, Feb 20, 2024
Slide 1: 2024 Half Year Result
2023 Full Year Result. Boldly backing 24 August 2023 business. 2024 Half Year Result. 20 February 2024
Slide 2: Agenda
Agenda. Topic Presenter CEO Update Joseph Healy CFO Update Andrew Leslie Conclusion and Outlook Joseph Healy Q&A Joseph Healy, Andrew Leslie, Chris Bayliss, Frank Versace, Lisa Frazier 2024 Half Year Result 2
Slide 3: CEO Update
CEO Purpose Update. To be the most trusted SME business Joseph Healy bank in Australia Vision To build a world-class SME business bank 3 2024 Half Year Result
Slide 4: The Judo Journey
The Judo Journey. $9.7bn $7.5bn Dec-22 Dec-23 $4.8bn $2.6bn Dec-21 Dec-20 2015 2016 2018 2019 2020 2021 2022 2023 Concept Seed Capital Pre-ADI Full Banking Scaling despite Growth and Achieved Halfway to launch Licence COVID-19 ASX listing Profitability metrics at scale Mid 2015 September 2016 March
Slide 5: Building a World Class Bank
Building a World Class Bank. World Class Scaling the Bank • Build a world class SME business bank Value • Achieve metrics at scale and ROE in the low- to mid- teens Build the Bank • Embed our unique culture • Market leading NPS >20 and operating model points above avg of majors • Invest in scalable
Slide 6: Running our own race
Running our own race. Ongoing increase in banker and broker numbers, with sustained market leading NPS 18 133 50 Locations Bankers Analysts Jun-23: 18 Jun-23: 123 Jun-23: 50 1,320 +57 +64 Brokers Lending NPS Deposit NPS Jun-23: 1,220 Jun-23: +65 Jun-23: +60 6 2024 Half Year Result Notes: Bankers and
Slide 7: Highlights
Highlights. Disciplined management of key operating metrics • Profit Before Tax increased 24% to $67.4m, up from $54.3m in 2H23, driven by higher pre-provision profits and lower cost of risk • Lending growth of $800m, representing ~3x system credit growth1 • Front book lending margin of 464bps in 2Q
Slide 8: 1H24 Highlights
1H24 Highlights. Strong 1H24 results. Re-affirming metrics at scale. Metric 1H24 result drivers 1H24 results At scale Prudent growth whilst prioritising lending margins, and higher GLA $9.7bn $15-20bn run off Moderating due to shifting funding mix, with higher margins on NIM 3.02% >3% new lending to
Slide 9: Dynamic management of lending margins
Dynamic management of lending margins. Strong improvement in lending margins in 2Q24 demonstrating our agility Improvement in lending margins in 2Q24 Lending margins over 1m BBSW (%)1 • Front book lending margins reflect composition of new lending, which fluctuate as Judo dynamically balances margin
Slide 10: Continued growth above system
Continued growth above system. Prudent balancing of growth, margins and risk in an uncertain, uneven economy Change in portfolio mix, Dec-23 vs Jun-23 Moderation in growth in response to the environment Change • Managing lending growth as we execute our TFF Sector concentrations Dec-23 vs Jun-23 rep
Slide 11: No changes to risk settings
No changes to risk settings. Appetite for certain sectors actively managed in response to the environment No change in transaction-level risk settings Average portfolio credit risk grade1 • Customer risk grades1 on new lending are in-line with the existing portfolio 7.04 7.04 7.04 7.03 7.04 7.04 7.0
Slide 12: Asset quality remains within long run assumptions
Asset quality remains within long run assumptions. 90+DPD and impaired reflect continued portfolio seasoning, the economy and some ‘indigestion’ 90+DPD and Impaired loans – Judo vs sector (% of GLA) • Judo has 61 customers in 90+ DPD and impaired, representing ~1.5% of total ~3.30% customers Judo’s
Slide 13: Judo has built a powerful deposit franchise
Judo has built a powerful deposit franchise. Judo TD balances exceed $7bn, from 41,800 customers $6.9b • 72% of TDs are from direct channels, as we have built $5.9b 72% of TD portfolio brand recognition and expanded our range of direct sourced directly $5.2b products $4.1b • The typical direct retai
Slide 14: Financial Update
Financial Update. Purpose Andrew Leslie To be the most trusted SME business Chief Financial Officer bank in Australia Vision To build a world-class SME business bank 14 2024 Half Year Result
Slide 15: 1H24 Result
1H24 Result. Profit & Loss Statement ($m) 2H23 1H24 Change Income 188 200 6% Operating Expenses (101) (106) 5% Net Profit Before Impairments 87 94 8% Impairment Expense (32) (27) (17%) Profit Before Tax 54 67 24% Key Operating Metrics 2H23 1H24 Change GLA ($m) 8,908 9,703 9% NIM (%) 3.34% 3.02% (32
Slide 16: Normalising NIM due to TFF refinance
Normalising NIM due to TFF refinance. NIM Waterfall – HoH (%) 3.34% (0.13%) (0.27%) 0.10% 3.02% (0.06%) 0.08% (0.04%) Increased use of Normalisation of deposit Partial refinance of warehouses plus Full period impact of costs at the top of the self-sec TFF Benefiting from increase Close management of
Slide 17: Continued growth and diversification of the funding stack
Continued growth and diversification of the 1H24 highlights funding stack. Movement in funding sources ($bn) • Term deposit base now $7bn; average tenor at origination of ~14 months, and remaining tenor of ~9 months 10.7 9.7 • $2.73bn committed warehouse facilities with $1.35bn 0.2 0.2 undrawn capac
Slide 18: TFF refinancing and liquidity
TFF refinancing and liquidity. Judo TFF refinance profile ($bn) On track to refinance TFF 2.8 2.8 2.8 2.6 2.6 • Continued execution of our TFF repayment strategy, 2.4 2.4 with $390m repaid in 1H24 0.6 2.2 0.8 1.0 • Existing warehouse capacity (committed, undrawn) 1.0 1.2 1.8 and elevated liquidity i
Slide 19: Transition to longer term funding stack underway
Transition to longer term funding stack underway. 12% 11% ~10% ~10% • Current TD funding is 52% of total assets, or 58% of 18% ~15-20% 24% assets ex preserved TFF component ~30% • Target for TDs to be 70-75% of at-scale funding base 19% • TD balances grew by $1bn in 1H24 14% • On track for ~60% TD f
Slide 20: TD margins in-line; sector spreads converging
TD margins in-line; sector spreads converging. • Heightened competition for term deposits as the sector has repaid $84bn of TFF • Competition primarily between majors and regionals, as spreads have converged • Judo pricing gap to all peers has reduced over time, and no longer needs to be top of bran
Slide 21: NIM drivers
NIM drivers. Headwinds from TFF refinancing to be offset by higher lending margins, improved funding mix and liquidity NIM Drivers 2H24 1H25 2H25 TFF refinance Significant drag from TFF refi No impact Benefit primarily from Benefit from normalising liquidity following Liquidity Ongoing liquidity opt
Slide 22: Operating expenses
Operating expenses. Operating Expenses ($m) and CTI (%) 1H24 drivers • Higher employee costs from run rate impact of recent 300.0 90% recruitment 250.0 54% 53% 70% • Growth in FTEs was primarily front line and technology 50% teams, with other areas now largely mature 200.0 30% • Amortisation on rece
Slide 23: Credit quality remains sound
Credit quality remains sound. Impairment expense ($m) Days past due & impaired assets (% GLA) • Collective provision (CP) increase due to growth, credit • 90+ days past due and impaired assets rising as expected deterioration and increase in vulnerable sector overlay – Increase in 90+ DPD and impair
Slide 24: Prudent provisioning
Prudent provisioning. Provisions ($m) and coverage (% GLA) Provisioning remains strong • Collective provisions increased by $5.0m HoH, due to: 200 1.60% 180 1.34% • Growth in the loan book, which drives an increase in 1.40% forward-looking provisions under accounting standards; 160 1.21% 1.20% and 1
Slide 25: Capital
Capital. Judo remains well capitalised • Strong Dec-23 CET1 ratio at 16.2% remains sector leading 0.8% 17.5% (1.4%) • Term securitisation executed in Sep-23 demonstrates 16.7% 0.6% (0.3%) flexibility to manage capital position above targets 16.2% (0.1%) (0.0%) • No planned hybrid or term securitisat
Slide 26: Conclusion & Outlook
Conclusion Purpose & Outlook. To be the most trusted SME business Joseph Healy bank in Australia Chief Executive Officer Vision To build a world-class SME business bank 26 2024 Half Year Result
Slide 27: Operating environment
Operating environment. Greater probability of a soft landing; positive for asset quality and lending growth • We expect a soft landing for the economy Lending appetite – by sector • Our approach to lending remains prudent but dynamic; appetite to different sectors is regularly Exposure 2H24 reviewed
Slide 28: FY24 guidance
FY24 guidance. Disciplined management of key business metrics Metric Detail FY24 Target GLA Prudent approach to managing growth and margins within risk appetite $10.5bn – 10.7bn NIM NIM in 2H24 of 2.70% – 2.80% impacted by TFF refi; Trough NIM in 2H24 2.85% – 2.90% CTI Disciplined investment in scal
Slide 29: FY25 outlook
FY25 outlook. Judo is targeting FY25 profit growth of 15% or higher Metric Detail Growth of between $2.0 - $2.5bn, driven by: • Hiring of additional bankers, in addition to those already hired in 1H24 GLA • Continued expansion into the regions, including increased agribusiness lending • Ongoing stre
Slide 30: Conclusion
• Disciplined management of the business in the uncertain, uneven operating environment • Delivering above-system lending growth and improved margins, within existing risk settings • Strong funding position, underpinned by our powerful deposit franchise Conclusion. • On track to refinance the TFF by
Slide 31: Questions
Questions. 2024 Half Year Result 38
Slide 32: Appendix
Appendix. 2024 Half Year Result 39
Slide 33: Lending growth
Lending growth. Judo’s loan book over time ($bn) 9.7 8.9 10% 7.5 45% 55% 6.1 90% 4.8 3.5 2.6 1.8 16% 24% Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 76% 53% 31% Business Loans Asset Finance Home Loans Line of Credit Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec 23 Fully Secured Ap
Slide 34: Credit quality key metrics
Credit quality key metrics. Gross Loans & % of Gross Loans & % of Fully / Partially % 90+DPD & Customer groups Sectors Advances ($M) Advances Secured Impaired 90+DPD & impaired Jun-23 Dec-23 Jun-23 Dec-23 Jun-23 Dec-23 Jun-23 Dec-23 Jun-23 Dec-23 Manufacturing 643 688 7% 7% 86% 85% 4.16% 4.40% 7 13
Slide 35: Thank you
Thank you. 2024 Half Year Result 42
Slide 36: Important information
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 20 February 2024. It is information given in summary form only and does not purport to be complete. It does
Judo Capital Holdings — H1 2024 Earnings Presentation on 6ix