Judo Bank said all of its prospectus forecasts had been met, including on bad debts and expenses, which rose sharply as it grew.
Judo Bank said the rising cash rate will boost its earnings next year, as the business lender hit profitability and said it remained on track for loans to triple over the next four years as major banks pulled back.
Judo lends to businesses on floating rates that can easily be repriced up when rates rise, while much of its funding costs are locked in with retail term deposits; the dynamic will help push its ‘net interest margin’ above 3 per cent next year. This helped propel Judo shares on Thursday morning. This was double the forecast in the prospectus. The stock bounced, rising 6.5 per cent to $1.30 as the market opened.
In addition, $20.1 million was provided for loans that might go sour as the economy faces more pressures. Judo said 86 per cent of credit exposures are fully or partially secured. Unlike mortgages, its business loans can be repriced every 30 days and 91 per cent of its lending is on a floating rate linked to BBSW, which it says provides more pricing power. It has $4.6 billion of deposits and is raising deposits at a faster rate than loan growth.
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