Yesterday afternoon, Judo Capital Holdings Ltd (ASX: JDO) shares suddenly dropped 19%.
Judo tanked after emerging from a trading halt. As covered by the Motley Fool's James Mickleboro, the market strongly disapproved of Judo's trading update, which flagged a slowdown in book growth, higher impairments, and potentially weaker margins.
Judo Bank specialises in lending to small and medium-sized businesses (SMEs). It provides loans, lines of credit, and other tailored financial products. With a market capitalisation of $1.6 billion, it is much smaller than the big four banks; however, it sits within the ASX 200.
Recognise the name but not sure where from? Judo Bank's Chief Economist, Warren Hogan, is frequently featured in the news providing commentary on interest rates. In 2023, he was the nation's top economic forecaster. In the Financial Review's annual ranking of economists in 2023, he was the only one of the 29 surveyed analysts to predict the RBA would raise the cash rate five times to 4.35%.
What prompted the sudden announcement?
Yesterday afternoon, Judo entered a trading halt before revealing its trading update. As reported by the Australian Financial Review, the sudden announcement was likely prompted by the business bank's chief financial officer, Andrew Leslie's, recent presentation at a UBS event. It is suggested that Leslie may have "given too much away", requiring the business bank to immediately update the market.
Macquarie revises price target
This morning, Macquarie released a research report on Judo Bank, taking into account the recent update.
The investment bank has revised its price target to $1.70, with a neutral rating. On 25 March, Macquarie's price target on Judo Bank was $1.85.
Justifying this revision, Macquarie noted
While [Macquarie's] revisions are not significant… we have believed for some time that consensus was too optimistic and did not factor in increasing risks for both lending and deposit competition, as well as moderating credit growth.
Judo Bank is scheduled to present at the Macquarie Australian Conference 2025 on 6 May. Safe to say there will be heightened investor and analyst interest following this recent development. Markets will also be pondering the implications for the wider banking industry.
Are Judo Bank shares one to watch?
Investors love to discuss the strong performance of the big four banks last year and whether that can continue. However, in 2024, Judo Bank was the best-performing stock in the banking sector, rising an impressive 82%.
Judo Bank shares have had a volatile time over the past five years. While they are down 36% over that time frame, the journey has not been linear. Although the shares are having a tough time right now, they might be one for ASX banking enthusiasts to keep on their radar.
