Q3 2025 Judo Capital Holdings Ltd Trading Update Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jonathan Mott - Barrenjoey - Analyst : Chris, when you were previously talking about lending growth, you kind of had this expectation of around $3 billion in loan growth and growth in GLA per annum. And I can understand the moving parts that you've seen in this half with delayed growth given some of the issues around the world and elections and also elevated runoff. But is that $3 billion per annum growth in total loans still a viable target? Christopher James Bayliss - Judo Capital Holdings Ltd - Chief Executive Officer, Managing Director, Member of the Management Board Yes. I mean somewhere between two and three is very viable. If you break it down into, we have 160 bankers now. And if you sort of break it down, Jon, into sort of a monthly origination rate per banker, it works out at about $2.5 million, $3 million per banker per month. Now that is also our average loan size. So it really is no more than one loan per banker per month. Now runoff is something that we manage carefully as well. As you know, structural runoff in terms of capital and interest is about 8%. And we've always guided the market to assume runoff of about 20%. So the simple math is we originate about $5 billion, and we see about $2 billion, $2.5 billion come off the back through runoff. And I see no reason why that shouldn't continue. But we think of growth around about that $2 billion, $2.5 billion because we are very focused on protecting the economics of the book. And there's no doubt about it. Competition has increased significantly. We are seeing runoff elevated a little bit higher than what we had originally assumed at rates, which don't make sense for us. But in simple math, 160 bankers originating sort of $400 million, $500 million per month with gross originations of sort of $5 billion with runoff at 20% of the $12 billion book, you sort of get to that $2.5 billion of growth mark.

Question: Jonathan Mott - Barrenjoey - Analyst : Thank you.

Question: Matthew Wilson - Jarden - Analyst : Yeah, good morning, team. Hopefully, you can hear me. I'm stuck in a storm in Wellington. Christopher James Bayliss - Judo Capital Holdings Ltd - Chief Executive Officer, Managing Director, Member of the Management Board That's unusual for the second windier city in the world.

Question: Matthew Wilson - Jarden - Analyst : Are you still confident in attracting 15 more bankers this year? Christopher James Bayliss - Judo Capital Holdings Ltd - Chief Executive Officer, Managing Director, Member of the Management Board How many we've got about, yeah, not, I mean it might be 10 to 15, exact number on the landing spot, but yes, roughly there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 6:30AM, JDO.AX - Q3 2025 Judo Capital Holdings Ltd Trading Update Call

Question: Matthew Wilson - Jarden - Analyst : Yeah. And just to sort of add some color to your '26 guidance, I think consensus was looking at sort of 60% PPT growth. You've come out with 50%. Why we're still only in, it's the May 1, and you've come out and given guidance on '26. You're due to give an investment update on of June 3. It looks like a slight downgrade to '26?

Question: Matthew Wilson - Jarden - Analyst : Thanks, guys.

Question: Jason Shao - Macquarie Research - Analyst : Hi, guys. Thanks for taking my question. Just on your cost of risk, you noted it was higher. I mean are you able to give any sort of guidance around the sort of magnitude when you mentioned it's higher? And you sort of outlined that it's driven by more specific provisions. Which sectors or segments are you sort of allocating those provisions to which the name exposures?

Question: Jason Shao - Macquarie Research - Analyst : Are you able to give any sort of color around the magnitude of our [VTD]?

Question: Jason Shao - Macquarie Research - Analyst : Yeah. And just on deposits, you mentioned you might be able to take deposit repricing actions to offset some of the sort of the swap rate pressures. How much scope do you think you have to do that, given that you sort of need deposits to fund your growth pathway? Is it largely dependent on competitive dynamics?

Question: Jason Shao - Macquarie Research - Analyst : Thank, thanks a lot.

Question: Andrew Triggs - JPMorgan - Analyst : Thank you. Firstly, just a question with respect to the unchanged FY25 PBT guidance. Just I'm struggling to see where the offset comes from, Andrew, to the higher cost of risk expectation. It doesn't look like NIM expectations have changed and cost, my rough math suggests you would need negative cost growth in the second half to offset that cost of risk, that higher cost of risk. Can you just maybe comment on those aspects, please?

Question: Andrew Triggs - JPMorgan - Analyst : Okay. That's helpful. And just on the sort of the broad FY26 guidance, I mean, I think you've sort of referred to assuming a stable economic conditions. But what is that assuming with respect to cost of risk versus the normalized assumption, normalization of sort of activity in the SME economy and deposit spreads, et cetera, just in broad terms? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 6:30AM, JDO.AX - Q3 2025 Judo Capital Holdings Ltd Trading Update Call

Question: Andrew Triggs - JPMorgan - Analyst : And sorry, just to go back to the cost of risk, would you expect it still to be meaningfully above that 50 basis point assumption for the long term?

Question: Andrew Triggs - JPMorgan - Analyst : Yeah, thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 6:30AM, JDO.AX - Q3 2025 Judo Capital Holdings Ltd Trading Update Call

Question: Nathan Lead - Morgans Financial Limited - Analyst : Chris and Andrew, just a couple of questions for me. So first up, you talked about how the operating leverage is there and will be coming through. And you mentioned or you provided sort of qualitative steer in terms of the expense growth. But could you put a bit more sort of quantification around it for us in terms of either the CTI or the absolute growth coming through?

Question: Nathan Lead - Morgans Financial Limited - Analyst : Yeah. Got it. Just interested on the term deposit side of things. Can you just give us where you're at the moment in terms of average remaining term of the back book of the term deposit books? And then at the moment, just where you're typically writing or issuing new deposits in terms of the front book. I suppose then that allows us to sort of think about how that volatility in the spreads passes through the NIM over time.

Question: Nathan Lead - Morgans Financial Limited - Analyst : Yeah. So the remaining term of the back book is eight months, but what are you typically getting now with your front book? Typically 12 months or tenor --

Question: Nathan Lead - Morgans Financial Limited - Analyst : And you're still targeting that 70% of funding coming through the TDs by the end of the financial year? Christopher James Bayliss - Judo Capital Holdings Ltd - Chief Executive Officer, Managing Director, Member of the Management Board Yes, absolutely. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 6:30AM, JDO.AX - Q3 2025 Judo Capital Holdings Ltd Trading Update Call

Question: Nathan Lead - Morgans Financial Limited - Analyst : Great. Okay, thank you.

Question: Richard Wiles - Morgan Stanley - Analyst : Good afternoon. Just wanted to ask you a couple of questions about the lending rates. I think the lending rate was the new lending rate was 4.6% in the third quarter. Do you think it will fall from these current levels? And how should we be thinking about the blended lending rate? The new rates have been 4.5% or above in, I think, five of the past six or seven quarters. So does that mean the blended lending rate should be heading above 4.5% in the first half of '26? Christopher James Bayliss - Judo Capital Holdings Ltd - Chief Executive Officer, Managing Director, Member of the Management Board So on the front book in terms of new originations, yes, 4.6%, 4.5%, it's very strong. It's where our customer value proposition really excels. We're faster than the competition. We structure better. We bring a better relationship proposition to those transactions. We do get a significant premium to the major banks. But I'm not seeing any real pressure on that rate. The pressure, I think, is more when the customer has been with us for two or three years, maybe the risk profile has normalized a little bit closer to where the major banks are. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 6:30AM, JDO.AX - Q3 2025 Judo Capital Holdings Ltd Trading Update Call And with the increase in competition and the fact that the major banks have all fallen back in love with SME lending, there's downward pressure there. And so that will always mean that the overall blended margin will be lower. I mean that was always the thesis, right? The blended margin will be lower than your origination margin because at point of origination, you're generally overcoming we have a much, much higher superior customer value proposition than the major banks. So I don't think that dynamic is going to change materially. I mean to get to the NIM of over 3%, it's as much about the liability side of the balance sheet as it is about the lending side. And of course, our job is to make sure that the spread between the two is optimized.

Question: Richard Wiles - Morgan Stanley - Analyst : So Andrew, it sounds like the branchless banks have got more competitive, that cohort has moved up on pricing. It's not the whole market overall?

Question: Tom Strong - Citi - Analyst : Hi, and thanks for taking my questions. If I was just to follow on just from your last answer, when you talk about the wider TD spreads in the current environment sort of being a short-term impact from the volatility in swaps. I mean if the cash rate plays out as market pricing is implying, like how long do you think it will take to restore that sort of 80 to 90 basis point spread?

Question: Tom Strong - Citi - Analyst : All right. Fantastic. And just to clarify on the new lending spreads, I mean, I think they were 470 in the December quarter and now mid-400s in the pipeline. Is this a function of competition or mix of pipeline or a bit of both? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 6:30AM, JDO.AX - Q3 2025 Judo Capital Holdings Ltd Trading Update Call Christopher James Bayliss - Judo Capital Holdings Ltd - Chief Executive Officer, Managing Director, Member of the Management Board Mix really. There's not a lot on competition. As I said, we generally our value proposition at point of origination is very strong. It will be mix in terms of average loan size. And just, yes, it's deal specific. It oscillates a little bit around. But as long as we're sort of above that 4.5%, I'm happy.

Question: Olivier Coulon - E&P - Analyst : Hi guys. Thanks for taking my question. You may have answered it, and I missed it because I got kicked off the phone. But can you comment on April and what GLA did over that month? Because obviously, APRA stats aren't updated for that. But I would assume that you've got a pretty good idea as to what you did and, therefore, what the implicit kind of number that you're guiding to for May and June is? And then further to that, I suppose, what are your expectations that are kind of built into your FY26 aspiration for growth? Christopher James Bayliss - Judo Capital Holdings Ltd - Chief Executive Officer, Managing Director, Member of the Management Board I mean, Olivier, Jon Mott asked that question really around FY26. And we're sort comfortable sort of guiding to that sort of $2 billion, $2.5 billion of growth. In terms of April, actually, we haven't, I mean, I actually haven't seen the numbers myself yet. As you'd expect, we have a lot of drawdowns that occurred in the last couple of days of the month and then accumulated interest and what have you that goes through. But no, I don't have that number to hand. I think the guidance that we've given in terms of, what's important, I think, is that guidance we've given in terms of the end of June because May and June, in particular, are the busiest months of the calendar, of the financial year. And June, in particular, because of, obviously, the end of the tax year as well is by far our largest origination month. So as I said, I just want to just reiterate and just put into context the fact that we've downgraded the June landing position by about $350 million. We normally settle about $150 million a week. So we are literally just talking about a couple of weeks worth of originations and trying to get as even though it's only eight weeks out, you could easily say, well, Christ, Chris, you should be able to know now what's going to happen in eight weeks' time. But if something falls the wrong side of a two week window, and these are complex transactions, right? They're not just, they're not home loans. They don't just fall off the end of the conveyor belt. There's properties that are being acquired. There's conditions precedent that have to be met. There's other there might be other funders involved in terms of being ready on the discharge side. So one of the things that's always been really difficult for our business is predicting the exact day when something is going to settle. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 6:30AM, JDO.AX - Q3 2025 Judo Capital Holdings Ltd Trading Update Call And so it is very difficult. Again, I sort of, on the one hand, feel a little bit uncomfortable giving a range and not an actual number for the end of June, but it's just not the nature of our business and the types of transactions that we do.

Question: James Eyers - The Australian Financial Review - Analyst : Hi, Chris. Hi, Andrew. I was just going to ask about the process for getting this update out today. Street talk, the Finn Andrews just sort of talking about a presentation you did at one of the investment banks in Melbourne on Tuesday. There are a few notes in the market pointing to an update you're going to be doing at Macquarie next week. And then we have the 6.5% fall in the stock price this morning, a one hour halt, an update and the stock sort of finishing 17% down. So it sort of looks pretty messy. And I was just wondering if you could explain whether or not you think these updates to some investors have had anything to do with where the shares have ended today? Christopher James Bayliss - Judo Capital Holdings Ltd - Chief Executive Officer, Managing Director, Member of the Management Board No, I don't think it's anything to do with those updates. I mean you're right, we're at the Macquarie conference next week. We always planned on doing a trading update. Our Board was scheduled for today, and that's been in the calendar for the last 12 months, which is when we were taking the Board through the latest landing position for the end of June. I think, James, the APRA stats came out yesterday, or the day before yesterday. So that's when, obviously, we are a bank that only lends money effectively. And so the APRA stats give the market an insight into what happened to the book in March. So I think there was perhaps some anticipation that when you do the math between what those stats were showing at the end of March and where we were guiding the market to sort of between $12.7 billion and $13 billion, but there was probably some expectation that was going to come off slightly. But no, we had always planned to give a trading update as soon as our -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 6:30AM, JDO.AX - Q3 2025 Judo Capital Holdings Ltd Trading Update Call

Question: James Eyers - The Australian Financial Review - Analyst : Okay, thank you.