Judo Capital Holdings Limited · ASX:JDO
Judo Capital — FY2024 Earnings Presentation
35 slides from Judo Capital's earnings presentation, Aug 20, 2024
Slide 1: Boldly backing business. 2024 Full Year Result
Boldly backing NT Mackay business. WA QLD Rockhampton Sunshine Coast Brisbane Gold Coast SA Tamworth Northern Rivers Perth NSW Newcastle 2024 Full Year Result. Bunbury Adelaide Orange Parramatta Sydney VIC Canberra Bendigo Albury 20 August 2024 Geelong Melbourne Dandenong Judo’s 21 locations, June-2
Slide 2: CEO Update
CEO Update. Chris Bayliss Chief Executive Officer 2 2024 Full Year Result
Slide 3: The Judo Journey
The Judo Journey. Five-year Surpassed TFF FY24 S&P/ASX 200 anniversary $10 billion refinancing Milestones Inclusion as an ADI loan book completed $10.7bn Loan Book Loan Book Loan Book Loan Book $8.2bn Loan Book Deposit Book Loan Book Judo Bank Launches 2018 2019 2020 2021 2022 2023 2024 Pre-ADI Full
Slide 4: FY24 Results
FY24 Results. Continued execution delivering results in line or better than guidance Metric Key points FY24 Results FY24 guidance1 • Strong lending growth, 3x system2 GLA ü $10.7bn $10.5bn – $10.7bn • 4 new locations and 21 bankers added during the year • Margin on new lending at mid-400bps over BBS
Slide 5: Service profit chain
Service profit chain. Empowered employees delivering positive customer outcomes, driving return on equity 72 +59 45% 26% 4.5% JEDI Employee Lending 3-year CAGR 3-year CAGR Return on Engagement1 NPS2 GLA growth productivity Equity growth3 1. 12-month rolling average of JEDI (Judo Employee Delight Ind
Slide 6: A clear, simple strategy
A clear, simple strategy. Simplicity is a key element of our vision of being a world-class SME business bank Judo’s core lending competitive advantages Relationship-led Judgement Speed Core SME lending franchise Strategic enablers Scale our advantage Excel in execution Empower our people High employ
Slide 7: Judo's sweet spot remains relatively uncontested
Judo’s sweet spot remains relatively uncontested. Judo’s target lending market sits between the incumbent banks and private credit • Judo is delivering above-system growth, driven by its pure-play Judo’s strategic positioning in SME lending specialist banking model, designed specifically to address
Slide 8: Achieving the sweet spot to maximise ROE
Achieving the sweet spot to maximise ROE. Judo’s loan book ($bn) Average portfolio credit risk grade1 10.7 9.7 9.8 9.4 8.9 7.03 7.04 7.04 7.04 7.04 7.04 7.03 7.03 7.08 7.07 8.0 6.99 7.5 6.8 6.1 5.3 4.8 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24 Jun-24 Dec-21 Mar-22 Jun-22
Slide 9: Unlocking growth & ROE opportunities
Unlocking growth & ROE opportunities. Focusing on SMEs’ needs and building upon our core competitive advantages Adjacent SME Adjacent SME New regions ROE levers segments lending products Successful regional Strong growth in agri Deepen relationships Operating leverage What we expansion lending • Enh
Slide 10: CFO Update
CFO Update. Andrew Leslie Chief Financial Officer 10 2024 Full Year Result
Slide 11: FY24 Result
FY24 Result. Profit & Loss Statement ($m) FY23 FY24 Change Income 353.0 396.7 12% Underlying Operating Expenses (190.9) (216.5) 13% Underlying Profit Before Impairment 162.1 180.2 11% Impairment Expense (54.6) (70.1) 28% Underlying Profit Before Tax 107.5 110.1 2% Non-recurring Costs1 - (5.8) n.m. S
Slide 12: Sustainable growth and margins
Sustainable growth and margins. New business lending achieved mid-4%s margin, consistent with at-scale NIM of >3% Judo’s loan book over time ($bn) Lending margins over 1-month BBSW (%) 10.7 9.7 8.9 4.6 4.6 4.5 7.5 4.4 4.4 Jun-24 margin 6.1 4.5 4.3 4.3 4.3 of 4.5% 4.5 4.5 4.2 on record 4.8 4.3 origin
Slide 13: Normalising NIM due to TFF refinancing
Normalising NIM due to TFF refinancing. 1H24 to 2H24 NIM Waterfall (%) 3.02% (0.05%) (0.39%) 0.10% 2.85% 0.11% 0.06% Normalisation of Diversification of Higher margin on Refinance Higher yields on deposit costs at funding and new lending and of self-sec TFF bonds and close the top of the reduction i
Slide 14: FY25 NIM drivers
FY25 NIM drivers. Headwinds from TFF refinancing to be offset by higher lending margins, improved funding mix and liquidity NIM Drivers 1H25 2H25 TFF refinance Residual drag from TFF refinancing No further impact Liquidity Benefit from normalising liquidity Benefit from ongoing liquidity optimisatio
Slide 15: Strong progress to at-scale funding stack
Strong progress to at-scale funding stack. Judo’s funding stack • TFF repayment completed, largely from growth in term deposits 12% 11% ~10% ~10% • Deposits ~64% of funding; now targeting ~75% of total ~15% 25% ~20% funding from term deposits at scale 24% • Lending growth to be largely funded from d
Slide 16: Operating expenses
Operating expenses. 500 100% 450 90% Underlying operating expenses ($m) and CTI (%)1 FY24 drivers 400 80% 350 70% • Higher employee costs from increasing average FTE 300 54.1% 54.6% 60% • At Jun-24, total FTE remained flat while banker FTE increased, reflecting non-customer facing areas reaching 250
Slide 17: Impairment expense & provisioning
Impairment expense & provisioning. Impairment expense ($m) Provisioning ($m) 200 1.39% 74bps 72bps 1.40% 180 1.21% 160 149.1 1.20% 4.2 140 1.00% 120 107.5 100 5.0 0.80 % 108.8 70.1 80 0.60% 54.6 60 83.7 0.40 % 40 0.20% 20 36.1 18.8 0 0.0 0% FY23 FY24 FY23 FY24 Cost of risk ($m) Overlays Cost of risk
Slide 18: 90+ Days Past Due & Impaired Assets
90+ Days Past Due & Impaired Assets. 90+ DPD & Impaired Assets have flattened as rate of customer resolutions increases 90+ DPD and Impaired Assets (% of GLA) ~3.30% Judo’s 90+DPD and Impaired • 90+DPD and Impaired Assets were 2.31% of GLA equivalent to 50bps COR at Jun-24, up from 1.09% in Jun-23 2
Slide 19: Capital
Capital. Judo remains well capitalised 1H24 to 2H24 CET1 waterfall • Strong Jun-23 CET1 ratio at 14.7% remains sector leading 16.2% (1.5%) • Organic capital generation to improve; 2H24 NPAT (0.2%) (0.3%) 0.3% 0.2% 14.7% impacted by trough NIM, non-recurring costs and elevated capex • Term securitisa
Slide 20: Conclusion & Outlook
Conclusion & Outlook. Chris Bayliss Chief Executive Officer 20 2024 Full Year Result
Slide 21: We have a strong team in place
We have a strong team in place. Chris Bayliss Andrew Leslie Yien Hong Frank Versace Rosanna Fornarino Jess Lantieri Renee Roberts Chief Executive Officer Chief Financial Officer Chief Legal and Chief Strategy and Chief Operating Officer Chief People and Chief Risk Officer Commercial Officer Growth O
Slide 22: Operating environment
Operating environment. SME sector remains resilient with momentum in business investment Non-mining business investment1 ($bn/quarter) • The Australian economy has been resilient in the 40,000 past two years 30,000 • Balance sheets for SMEs remain robust, with capacity to invest 20,000 10,000 • Stru
Slide 23: Underlying operating leverage
Underlying operating leverage. Estimated TFF’s contribution to Profit Before Impairment ($m)1 • Judo was eligible for a large TFF allocation, 180 and provided strong support for SMEs 162 during COVID-19 59 • This in turn contributed to profit and 76 supported capital generation, but masked FY25 Prof
Slide 24: FY25 guidance
FY25 guidance. Disciplined management of key business metrics Metric Detail FY25 Target Metrics at-scale Lending to accelerate, supported by recruitment of an additional GLA $12.7bn - $13.0bn $15bn - $20bn 20 bankers in 10 new locations by Jun-25 Gradual improvement throughout FY25 from trough NIM i
Slide 25: Conclusion
Conclusion. • Consistent execution of our clear and simple strategy to scale to a world-class SME business bank • Our core SME lending franchise is performing well, and our significant balance sheet creates more optionality • Expanding presence in the regions, looking at adjacent products and segmen
Slide 26: Questions
Questions. 2024 Full Year Result 26
Slide 27: Appendix
Appendix. 2024 Full Year Result 27
Slide 28: Key FY25 considerations
Key FY25 considerations. Metrics Key considerations for FY25 Lending to accelerate supported by recruitment of an additional 20 bankers in 10 new locations by Jun-25 GLA • FY25 target: $12.7bn - $13.0bn • Run-off stable at ~20% • Lending growth to be largely funded through deposit growth Gradual imp
Slide 29: Loan book characteristics
Loan book characteristics. Quarterly run-off analysis 8% 25% 22% 22% 44% 21% 19% 18% 19% 17% 8% 56% 8% 8% 8% 8% 92% 8% 7% 8% 4% 5% 8% 7% 7% 4% 6% 3% Floating Fixed Interest Only Princip al & Interest 4% 9% 6% 5% 6% 9% 7% 10% 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 External refinances Discretionary p
Slide 30: TD margins in-line with long-term assumption; sector spreads diverging
TD margins in-line with long-term assumption; sector spreads diverging. Spread from 1-year TD to 1-year swap rate1 (%) 2.5 Jun-22 qtr spreads Jun-24 qtr spreads COVID-19 liquidity Majors: -203 bps Majors: 18 bps 2 Regionals: -81 bps Regionals: 42 bps Branchless: -34 bps Branchless: 61 bps 1.5 Judo:
Slide 31: Credit quality key metrics
Credit quality key metrics. Gross Loans & % of Gross Loans & % of Fully / Partially % 90+DPD & Customer groups Sectors Advances ($M) Advances Secured Impaired 90+DPD & Impaired Jun-23 Jun-24 Jun-23 Jun-24 Jun-23 Jun-24 Jun-23 Jun-24 Jun-23 Jun-24 Manufacturing 643 754 7% 7% 86% 84% 4.16% 8.91% 7 17
Slide 32: Judo's hedging profile
Judo’s hedging profile. Minimal interest rate risk through hedging. Reduced NIM volatility with introduction of ITOC Judo’s hedging profile as at Jun-24 Judo’s ITOC portfolio 11,000 4.8% 9,000 7,000 4.6% 5,000 4.4% 3,000 4.2% $m 1,000 4.0% -1,000 3.8% -3,000 3.6% -5,000 -7,000 3.4% -9,000 3.2% -11,0
Slide 33: Glossary
Glossary. $ Dollar amounts, in Australian dollars unless stated otherwise Judo Extended Value Judo Extended Value is the market value of the asset less a (JEV) deduction for possible deterioration over time or at recovery, and AAA pipeline Loans in application, approved and accepted status, but not
Slide 34: Thank you
Thank you. 2024 Full Year Result 34
Slide 35: 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 August 2024. It is information given in summary form only and does not purport to be complete. It does no