Judo Bank chair Peter Hodgson has lashed shareholders during the firm’s Annual General Meeting today, expressing his “disappointment at the market’s reaction” and the performance of the bank’s share price following the release of its annual results in late August.
Hodgson said that he and his fellow board members were “taken aback” by the continuing fall in the bank’s share price despite a “sound full-year result”.
Upon the release of the bank’s FY2023 results on 23 August, Judo’s share price dropped by nearly 20 per cent at the following day’s close, sitting at $1.02. By the 28 August, it fell to a then-record low of $0.89.
Today, the stock sits at $0.86, significantly down on the $2.30 high watermark it hit when first listing on the ASX in 2021.
According to Hodgson, the Judo board questioned whether this was “a verdict on strategy, the results themselves, or what some might perceive as uncertain times ahead”.
Hodgson said he remains perplexed by the drop. According to Judo, in the four years since it was granted its banking licence, the SME-specialist lender “has reached profitability faster than any other challenger bank globally”.
“We are frustrated with our current share price against our current performance since we were granted our banking licence in 2019,” Hodgson said.
Judo reported a pre-tax profit of $107.5 million in its FY2023 results, with its loan book hitting upwards of $9 billion. Depositors also kicked in nearly $6 billion – up by 46 per cent year-on-year, offering, Judo chief executive Joseph Healy said, “significant flexibility from a funding perspective”.
For Hodgson, the “clear progress” in results showed that Judo’s model “resonates with our customers and that we have the trust of the SME community as we continue to deliver on our key strategic commitments”.
Hodgson said he has since received feedback from shareholders, revealing that “no one took fault” with the Judo’s singular core strategy as a SME-focused bank.
“What came across loud and clear in these meetings is that our clear strategy, our uncomplicated business model, our specialist model with a focus on relationship banking, [is] absolutely resonating but that we must continue to focus on delivery.”
“The fundamentals and economics of our business model have remained firmly as we set them at the outset. We remain clear on how we will achieve our core financial targets whilst taking acceptable levels of risk.
He added: “We continue to have a very strong belief that over time the fundamental economics of our business are capable of delivering a return on equity in the low to mid-teens.”
Employees are also directly invested in the success or failure of the company, he said. Hodgson confirmed that Judo’s employees, managers, and directors collectively take an eight per cent equity stake in Judo.
Healy, Judo’s chief executive, stressed the importance of the bank’s unique relationship-oriented operating model, which he said allowed it to better trace the health of the lending market.
“We are monitoring the financial health of our customers very closely, and one advantage of our high-touch model is that we can engage at point easy to assist when issues are emerging.
“This is in contrast to what you see in other banks that have [fewer] resources focusing on their customer base and tend to get involved at a much later stage at point hard or point complex.
He added: “I do want to emphasise that we have been building strong diversification of our customer base across industries and geographies with an average loan size of $2.3 million.”
“FY2023 was an exceptional year for Judo,” yet, Healy said, “none of this progress is reflected in the equity market.”
In his concluding remarks, Healy urged for a reframing of the “one-size-fits-all” view of smaller banks.
“I want to address the myth that all small banks are competitively disadvantaged,” he said.
“This one-size-fits-all framing ignores the specialist and unique features of Judo Bank and the fact that we are legacy-free.”
“We’re not a ‘mini-me’ of the bigger banks… Being a smaller, more agile nimble bank soundly funded with a deeply experienced management team and a crystal-clear strategy is a unique strength not a weakness of this very special bank.
“In time, the market will better understand this – of this, I am very confident.”
