Judo Capital Holdings Limited · ASX:JDO
Judo Capital — Investor Presentation (February 2022)
35 slides from Judo Capital's investor presentation, Feb 22, 2022
Slide 1: 2022 Half Year Result
2022 Half Year Result. 22 February 2022 Boldly backing business.
Slide 2: Judo's locations
Judo’s locations Our purpose is to be the most trusted SME business NT bank in Australia QLD WA SA NSW VIC Capital City Regional Centre 2 2022 Half Year Result
Slide 3: Company Update
01 Company Update. Joseph Healy Chief Executive Officer 3 2022 Half Year Result
Slide 4: The Judo Journey
The Judo Journey. $4bn $5bn $1bn $2bn $3bn Sep-21 Feb-22 Aug-20 Apr-21 Jan-20 $3.8 billion / 76% of GLA originated during COVID with full awareness of risks 2015 2016 2018 2019 2020 2021 2022 Concept Seed Pre-ADI Full Banking Capital launch Licence Mid 2015 September 2016 March 2018 Early 2019 July
Slide 5: Why Judo is unique
Why Judo is unique. Pure play, purpose built Relationship-led model SME business lender enabled by technology Founder led model, with a Judo’s “Four Cs”: Character, ‘challenger’ culture Capacity, Capital, Collateral Committed to the craft of No legacy systems, SME banking products or infrastructure
Slide 6: Key business metrics at scale
Key business metrics at scale. Lending Current lending represents <1% market share. Lending of $15 - $20 billion equal to $15 - $20 billion portfolio approximately ~3% market share1. NIM of >3% to be supported by lending margins reflective of Judo’s pure play SME Net Interest >3% business lending mo
Slide 7: Result highlights
Result highlights. 38% growth in lending book, Underlying NIM1 of 2.73% to $4.85 billion at 31 Dec up 8bps vs 2H21 Pro Forma cost to income Pro Forma Profit Before Tax $3.0m ratio of 83%, down 15% Higher front book lending Industry-leading SME margins, 4.5% in Dec-21 quarter Customer NPS of +74 2 Lo
Slide 8: Portfolio health check – January 2022
Portfolio health check – January 2022. The benefits of Judo’s relationship led model are highlighted during periods of uncertainty • Judo’s bankers maintain close relationships with all customers, particularly in sectors at risk of experiencing stress • The COVID-19 wave in January 2022 primarily im
Slide 9: Financial Update
02 Financial Update. Chris Bayliss Deputy Chief Executive Officer & Chief Financial Officer 9 2022 Half Year Result
Slide 10: 1H22 Result
1H22 Result. 1H22 2H21 1H vs 2H Prospectus Variance FY22 P&L Net Interest Income ($m) 73.5 49.5 48% 160.5 Impairment expense ($m) 9.6 1.5 large 28.5 Pro Forma PBT ($m) 3.0 (0.7) large 7.4 Statutory Net Profit/(Loss) After Tax ($m) (16.1) 1.9 nm (10.2) Key Operating Metrics Lending Portfolio ($bn) 4.
Slide 11: Strong lending growth continues
Strong lending growth continues. Judo’s loan book over time ($bn) Judo’s loan book characteristics 4.85 9% 3.52 45% 55% 2.63 91% 1.79 17% 25% Business loans Asset finance Home loans Line of credit 27% 56% 75% 2H20 1H21 2H21 1H22 Fully Secured Applications, accepted, approved Partially Secured 0.7 0.
Slide 12: Investing in bankers and capability
Investing in bankers and capability. Relationship bankers and analysts (#) Judo continues to attract the top talent with strong growth in relationship banker and analyst numbers 36 • 95 relationship bankers and 39 relationship analysts as 27 at Feb’22 20 • Jun’22 prospectus banker target is 98 14 •
Slide 13: NIM and Underlying NIM
NIM and Underlying NIM. Underlying NIM Waterfall – 2H21 to 1H22 (%) Underlying NIM improved by 8 basis points 3.2% 0.12% (0.16%) • TFF benefit of 19 bps driven by replacement of part of 0.19% 3.0% (0.02%) (0.05%) the preserved component of RBA TFF facility 2.73% 2.8% 2.65% 2.6% • Other cost of fundi
Slide 14: Lending margins
Lending margins. Judo’s loan book ($bn), front book and back book 1H22 front book lending margins remained above lending margins above 1m BBSW (%) prospectus guidance of 4.3% • Drop in front book margins in September 2021 quarter 7.0 5.0% due to intense short term period of competition 4.9% 4.9% 4.8
Slide 15: Funding mix and cost
Funding mix and cost. Movement in funding sources ($bn) 6.0 0.1 A sustained reduction in funding costs has been achieved 0.1 • 5.0 0.1 1.3 0.1 Funding program continued to mature, with growth in existing channels and establishment of new channels 4.0 0.7 0.5 0.6 3.0 2.0 • Deposit costs reduced refle
Slide 16: Deposit market dynamics
Deposit market dynamics. Judo currently has 0.4% market share of Australia’s $800 billion1 term deposit market • Judo term deposit pricing is dynamic according to funding requirements • The annual contestable market is c.$400 billion2 taking into account high retention rates • Judo’s requirements th
Slide 17: Funding strategy
Funding strategy. Judo will drive its existing funding channels while also utilising its investment grade credit rating to enter new markets and develop new products • Term deposits – remain the primary source of funding – Direct retail remains the primary channel driven by competitive pricing – Dem
Slide 18: Credit quality – Sectors at risk from COVID-19
Credit quality – Sectors at risk from COVID-19. • Less than 9% of Judo’s portfolio is in sectors Non-Performing loans Collective Provisions considered to be at risk of COVID-19 impacts as % of GLA (Dec-21) 1.00% as % of GLA (Dec-21) 0.90% • Credit quality in these sectors remains strong, 0.80% 0.70%
Slide 19: Credit Quality
Credit Quality. Impairments, provisioning and arrears Impairment expense ($m) Provisions ($m) and coverage (% GLA) DPD & Impaired Assets (% GLA) 1.2 0% 100 18. 0 0.03% 2% 90 1.29% 16. 0 1.0 0% 80 0.04% 1.00% 14. 0 1% 70 0.92% 0.8 0% 12. 0 9.7 60 1% 8.4 44.7 10. 0 0.6 0% 50 33.9 35.0 8.0 40 0% 0.91%
Slide 20: Operating expenses
Operating expenses. Pro Forma Operating Expenses ($m) 90. 0 • Increase in expenses primarily driven by recruitment 95% 98% 100 % 83% • 48% growth in relationship bankers and analysts over 80. 0 61.3 last 12 months 70. 0 50% 49.3 60. 0 50. 0 37.8 16.0 • IT expense growing moderately as benefit of clo
Slide 21: Capital
Capital. CET1 Waterfall – June 2021 vs December 2021 (%) CET 1 Ratio • Equity raising includes capital raised at IPO and $20m received in July 2021 as part of Judo’s final pre IPO equity raising. • Loan growth + other RWAs includes lending exposure growth • Risk weight on lending fell from 92% at Ju
Slide 22: Conclusion & Outlook
03 Conclusion & Outlook. Joseph Healy Chief Executive Officer 22 2022 Half Year Result
Slide 23: Culture
Culture. Judo’s purpose is to be the most trusted SME bank in Australia • Our organisational architecture has been built to deliver our purpose • We have hand chosen our people, who are passionate about supporting SME businesses • The Company is founder-led, with founder involvement at Board and man
Slide 24: Experienced management team
Experienced management team. Diverse and credentialed business banking professionals with deep domain expertise Joseph Healy Chris Bayliss Megan Collins CEO Deputy CEO & CFO Chief People & Culture Officer • 35+ years experience • 35+ years experience • 22+ years experience • Previously Group Executi
Slide 25: Areas of focus
Areas of focus. Launch specialist propositions Increase proportion of directly in Health and Agri sectors and originated lending AND increase further footprint expansion penetration of broker channel Extend suite of SME banking Develop new deposit products products and expand non-deposit funding pro
Slide 26: Positive outlook for business credit growth
Positive outlook for business credit growth. Growth 2012-19 2020 2021 2022F 2023F • 2022 system credit growth is forecast to be 7.3%, driven YoY% (avg) by business credit hitting a 14 year high, the strongest System 4.6% 2.0% 7.2% 7.3% 5.3% since 2008 Business 4.1% 1.1% 8.4% 8.7% 6.2% – Business cre
Slide 27: FY22 outlook
FY22 outlook. • Judo has strong momentum across all aspects of the business • Positive outlook for business credit growth; significant leverage to rising interest rates • We are confident of achieving FY22 GLA target of $6.0 billion • We expect to modestly exceed prospectus FY22 revenue and profit f
Slide 28: Conclusion
Conclusion. Judo’s strategy remains unchanged • We have a clear purpose: to be the most trusted SME business bank in Australia • We are a unique pure-play SME bank; we believe specialists outperform generalists • Judo has a unique customer value proposition that sets it apart from competitors • Judo
Slide 29: Questions
04 Questions. 29 2022 Half Year Result
Slide 30: Appendix
05 Appendix. 30 2022 Half Year Result
Slide 31: Pro forma income statement
Pro forma income statement. AUD, $m 1H22 2H21 1H21 Net interest income 73.5 49.5 35.0 Other operating income 0.4 0.6 4.7 Net banking income 73.9 50.1 39.7 Employee benefits expense (36.8) (28.3) (22.7) Other expenses (24.5) (21.0) (15.1) Total operating expenses (61.3) (49.3) (37.8) Net profit / (lo
Slide 32: Statutory to pro forma NPAT reconciliation
Statutory to pro forma NPAT reconciliation. AUD, $m 1H22 2H21 1H21 Statutory net banking income 73.9 50.1 39.7 Pro forma net banking income 73.9 50.1 39.7 Statutory profit/(loss) after tax (16.1) 1.9 26.8 Transaction and other related costs of the Offer expensed 23.0 1.3 0.0 Public company costs (1.
Slide 33: Peak TFF NIM and at-scale NIM
Peak TFF NIM and at-scale NIM. Evolution of NIM to Peak TFF NIM and at-scale NIM Peak TFF NIM mid-3’s At Scale NIM >3% 1H22 Underlying NIM 2.73% 33 2022 Half Year Result Not to scale and chronology may change
Slide 34: 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 22 February 2022. It is information given in summary form only and does not purport to be complete. It does
Slide 35: Thank You
Thank You. Boldly backing business.
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