Judo chairman lashes investors for tanking share price
Key Points
- Why it matters: Judo Bank shares have fallen 41¢ to 84¢ since the start of the year.
- This has frustrated the board and management, who do not believe it reflects their performance.
- While much of the uncertainty surrounds its margins as it refinances cheap funding, CEO Joseph Healy said the toll had been over-hyped.
Judo Bank chairman Peter Hodgson and chief executive Joseph Healy lashed out at investors who they claim crushed the lender’s valuation, saying they are variously frustrated and disappointed that the share price does not accurately reflect the performance of the business.
Shares in Judo, which lends to and takes deposits from small businesses, have dived 36.7 per cent to 84¢ since the start of the year. Judo floated at $2.10.
CEO Joseph Healy said that he wanted “nothing more than to see the share price improve”.
Mr Hodgson said the board was “taken aback” by the fall, especially after a $107.5 million pre-tax profit in the 2023 financial year, and attacked “short-term vicissitudes” in the market during his annual address to shareholders.
“As a board, we express our disappointment at the market’s reaction and the performance of our share price against these solid achievements,” he said on Wednesday.
While Judo lifted pre-tax profit by five times, most of the concerns surrounding the bank are around its net interest margins. It increased underlying NIM to 3.53 per cent in the year ended June 30, though there is uncertainty over where this goes as cheap term funding is replaced.
Judo borrowed $2.83 billion in cheap funding from the Reserve Bank of Australia during the pandemic, but will have to repay this using more expensive warehouse and deposit funding by next June. It will have a material toll on margins, but Judo has not quantified the hit.
Mr Hodgson said he had met major shareholders and was confident Judo still had their support. “While there are a range of views, no one took fault with our singular core strategy of a small business focused bank,” he said.
Judo ‘could repay TFF at will’
Mr Healy said he wanted “nothing more than to see the share price improve” and that the current valuation implied its return on equity would stall.
“We have a clear path to a return on equity above our cost of capital, and we are making strong progress with this plan,” Mr Healy said.
The CEO argued the funding strategy was “robust” and that the transition away from the RBA’s term funding was over-hyped. He highlighted the bank’s new $75 million hybrid raising, announced on Tuesday.
“The refinancing … was always going to place pressure on deposit pricing, but we believe this is temporary rather than a structural adjustment,” Mr Healy said.
Refinancing the TFF and “will be completed in June 2024”, he said. “We could repay the TFF at will, if desired,” he said.
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