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August proved to be a month of significant fluctuations for the Australian share market, with the benchmark ending right back where it began. Despite the overall market's volatility, one ASX bank stock stood out with remarkable performance: Judo Capital Holdings Ltd (ASX:JDO).
While the larger banks, including Commonwealth Bank of Australia (ASX:CBA), Westpac Banking Corp (ASX:WBC), National Australia Bank Ltd (ASX:NAB), and ANZ Group Holdings Ltd (ASX:ANZ), had varying results—CBA up about 1.5%, Westpac rising 4.8%, NAB dipping 1%, and ANZ increasing 4.6%—none of them matched the stunning returns of Judo Capital. The small business lender's shares soared approximately 19% throughout August, driven primarily by its robust full-year results.
Judo Capital’s performance was highlighted by a 20% increase in gross loans and advances (GLA) to AU$10.7 billion and a net interest margin (NIM) of 2.94%. The company also reported a 2% rise in underlying profit before tax to AU$110.1 million, aligning with its guidance. This growth reflects above-system lending at strong margins, effective cost management, and a strategic shift in the bank’s funding mix.
Excitement among investors was further fueled by Judo Capital's optimistic guidance for the upcoming year. Management has set a target of 15% growth in profit before tax. CEO Chris Bayliss emphasized the company’s commitment to becoming a world-class SME business bank, highlighting their relationship-based approach to lending. Bayliss noted that Judo’s experienced bankers will continue to support SMEs by providing credit to successful operators poised for growth and investment while addressing challenges faced by existing customers.
The positive response from the broker community underscores Judo Capital’s impressive performance. Ord Minnett has assigned a buy rating with a price target of AU$1.80, Morgans has given an add rating with a AU$1.69 target, and Goldman Sachs has also issued a buy rating with a target of AU$1.71. Currently, Judo Capital’s shares are trading at AU$1.70.
Despite the strong rally in Judo Capital's shares, the consensus among analysts suggests that the stock may now be approaching its fair value. Investors may want to exercise caution and wait for a potential pullback to secure a more attractive entry point.
