Credit quality “remains within planning assumptions” and arrears are flattening, Judo Bank disclosed in its FY2024 full year financial report.
Launched as a challenger bank and disruptor in 2019 specialising in SME lending, the fast-growing Judo is inevitably being tested two years into a period of tight monetary policy.
Arrears and impaired loans (as a percentage of gross loans) “have flattened to 2.31 per cent at June 2024 from 2.63 per cent at March 2024, remaining below Judo’s through-the-cycle assumption of 3.30 per cent” the bank said yesterday.
Still, segments of Judo’s loan book are flashing red hot.
The proportion of manufacturing loans either 90 days past due or impaired was 8.9 per cent at the end of June, around four times as bad as the portfolio average.
Two other hot spots are Discretionary Retail at 4.1 per cent and Property Operators at 3.9 per cent.
There are 84 customer groups in arrears of 90 days or more and impaired, and these loans are “fully provisioned for net expected loss” the bank said.
Judo places immense faith in the credibility and consistency of its business model, relationship- managers and its credit team.
Tough economic conditions for now do not phase CEO Chris Bayliss and his team.
With a loan book of $10.7 billion at the end of June, the bank is now targeting a loan book by the end of FY2025 somewhere in a range from $12.7 billion to $13 billion.
Judo is “lending to accelerate, supported by recruitment of an additional 20 bankers in and opening 10 new locations by June 2025” Bayliss said.
Not every metric is humming amid the commitment to the mission and a strategic plan laid down five years ago.
Net profit fell 3 per cent to 2.94 per cent.
The net interest margin fell 35bps to 2.94 per cent, and this might be the first reporting period in which Judo’s NIM has been less than 3 per cent since the bank opened for business.
As is typical, the liability side of the Judo book is flying, with growth in deposits over the year of 38 per cent to $8.2 billion.
Deposits represented 64 per cent of funding in 2024 and the bank plans for this share to lify to 70 per cent in 2025 and in the medium term will be 75 per cent “at scale”.