Judo Capital CEO Joseph Healy
Judo Bank is budgeting for a continuation of double-digit growth in business lending in the 2022/23 financial year and will push ahead with the rapid scaling-up of its operations to capitalise on this opportunity.
Judo Bank chief executive Joseph Healy said the bank had reviewed its portfolio, including a “deep dive” into more sensitive sectors like retail, food services and manufacturing. It found most businesses are looking beyond the anticipated slowdown in the economy as interest rates rise, and are still planning to invest for growth.
Reserve Bank figures show business loan balances grew by 13.2 per cent over the year to June – almost twice the rate of growth in home loan balances.
Healy said the bank does not expect a “major economic correction” and sees the coming year as a good opportunity to pick up market share, as the big banks and other lenders take a more cautious approach to business lending.
One precaution Judo took during the year was to reduce its exposure to commercial property from 29 per cent of its portfolio to 21 per cent.
The bank increased the number of relationship bankers from 98 in 2020/21 to 115 in the year to June, and has added 10 more since the end of June. Each relationship banker looks after 25 customers.
It started providing services in two new business segments – agribusiness and health.
Healy said the relationship model is a “strategic hedge”, meaning the bank stays close to its customers and can get early warning of emerging problems.
Judo released its 2021/22 results yesterday, reporting 73 per cent growth in its loan portfolio to A$6.1 billion.
Net interest income rose 101 per cent to $169.8 million. The net interest margin fell 1 basis point to 2.08 per cent. Judo adjusted its NIM for the impact of collateral required under its Term Funding Facility borrowing arrangement to report an underlying NIM of 2.79 per cent.
Healy said the bank is well placed to increase its margin as interest rates rise. More than 90 per cent of its loans are set at a margin over the 90-day bank bill swap rate, while the core of its funding is term deposits. He said NIM would be above 3 per cent in 2022/23.
The impairment expense rose from $10 million in 2020/21 to $25.4 million in the year to June, largely driven by the strong growth in the loan book.
Loans in arrears (payments overdue by 90 days or more) fell from 8 bps in 2020/21 to 1 basis point in the year to June 2022. Impaired assets fell from 26 bps of gross loans and acceptances to 15 bps.
Judo made a loss of $7.7 million, compared with a profit of $28.7 million the previous year.
On a pro forma basis, adjusting for $23 million of costs related to the bank’s ASX listing last October, as well as some other one-off items, Judo reported a profit of $9.1 million, compared with a loss of $5.1 million in 202/21.
The bank’s common equity tier 1 capital ratio was 20.5 per cent at the end of June.