SME challenger bank Judo Capital Holdings Ltd (ASX:JDO) released an investor day presentation on Wednesday, with JDO shares rising on a red day for the broader market.
Earlier this week, JDO shares hit an all-time low of $1.54 a share, as stock markets reeled from sharp sell-offs worldwide.
Over the past 12 months, the JDO stock is down 20%.
However, the challenger bank rose on Wednesday, suggesting the presence of bargain hunters:
Source: Tradingview.com
Judo’s Investor Day Reveals
In its Investor Day presentation on Wednesday, Judo provided the lowdown of the company’s 2022 prospectus.
Judo has forecast $6 billion for its 2022 lending portfolio, based off April’s $5.56 billion figure, with net interest income expected to grow from March’s $116.7 million to around $160.5 million.
However, its impairment expense will also be expanding, up $28.5 million from its March $15.6 million total.
The company claimed that it’s confident of 2022’s forecast, highlighting that it will benefit from rising interest rates, a sore point for many others in the current economic climate.
Judo expects ‘superior outcomes’ for risk management strategies, looks forward to a positive funding market outlook, and hints at a working model to create ‘sustainable competitive advantages’
JDO share price outlook
CEO and co-founder Joseph Healy commented on the outlook for Judo:
Judo Bank is a young business with strong growth ambitions.
Our year-to-date performance shows we have strong momentum.
We continue to drive strong lending growth and remain confident of achieving our prospectus forecast for GLA of $6.0 billion by 30 June 2022.
Mr Healy also said Judo is attracting talented as it scales towards a ‘world class SME business bank’.
The company now has 110 relationship bankers, beating its own forecast of 98 bankers by 30 June 2022.
Chris Bayliss, deputy CEO and CFO, said rising interest rates provide an advantage for JDO’s net interest margins (NIMs), aiding funding strategy over 3%, to be locked in at a fixed rate.
The outlook for ongoing cash rate increases provides a significant tailwind for our margins given our lending portfolio is largely floating-rate, while our funding costs are predominantly fixed.
As well as accessing fixed-rate funding from the RBA’s term funding facility, term deposits remain a very attractive source of funding. We are rewarding retail depositors with some of the most competitive term deposit rates in the market. At the same time, by utilising hedges, we are locking in our funding margins well below the levels required to deliver our at-scale NIM of over 3%.
Despite Judo bucking the trend with its share price rise on Wednesday, it was another dour day for the ASX.
But in this volatility resides opportunity.
The rising interest rates, for instance, are seen by Judo as a tailwind.
The trick is to find businesses capable of withstanding and benefiting from current conditions.
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Regards,
Kiryll Prakapenka,
For Money Morning
