Judo Bank Reports 33% Underlying PBT Growth, Expands to 26 Locations

Strong Financial Momentum

Judo Bank has delivered a compelling first half result for FY25, reporting a 33% increase in underlying profit before tax (PBT) compared to the second half of FY24. This performance was underpinned by robust lending growth, which expanded at an annualised rate of 18%, more than twice the sector average, and a net interest margin (NIM) that remained resilient at 2.81% despite the end of Term Funding Facility (TFF) support.

The bank’s disciplined cost management saw operating expenses rise modestly, with a cost-to-income ratio (CTI) of 57%, while asset quality remained stable with impaired loans and arrears well within the bank’s at-scale thesis. Judo’s proactive portfolio management and relationship-led lending model continue to support low cost of risk, contributing to improved profitability.

Regional Expansion and Talent Growth

Judo’s strategic expansion into regional Australia is progressing steadily. The bank added five new locations and 15 bankers in the first half of FY25, with plans to open 10 new branches and recruit 20 additional bankers by the end of the financial year. This expansion supports Judo’s unique customer value proposition centred on speed, judgement, and relationship-led banking, which resonates strongly with small and medium enterprises (SMEs).

With 26 locations now operational, including recent additions in key regional centres such as Mildura, Bendigo, and Hobart, Judo is broadening its footprint to capture underserved SME markets. The bank’s lending pipeline remains strong, with gross originations reaching $2.3 billion in 1H25, up from $1.8 billion a year earlier.

Improving Margins and Funding Profile

Judo’s net interest margin is expected to improve in the second half of FY25, with guidance pointing to an exit margin of around 3.0%. This reflects benefits from ongoing liquidity optimisation, a favourable funding mix with deposits increasing to approximately 70% of total funded assets, and stable blended lending margins forecast to hold at 4.3%.

The bank’s term deposit franchise continues to strengthen, with deposit margins aligning with long-term assumptions despite short-term volatility driven by swap rate movements. Wholesale funding optimisation and a well-supported Tier 2 capital issuance completed in late 2024 further underpin Judo’s capital position, which remains strong with a Common Equity Tier 1 (CET1) ratio of 13.8% at December 2024.

Outlook and Strategic Focus

Looking ahead, Judo is targeting a 15% growth in PBT for FY25, supported by continued lending momentum, stable credit quality, and emerging operating leverage expected to become more evident in the second half. The bank’s clear and simple strategy focuses on scaling its SME lending franchise, expanding into new regions, and exploring adjacent SME lending products.

CEO Chris Bayliss emphasised the bank’s commitment to empowering employees and delivering exceptional customer experiences, which are key drivers of the improving return on equity (ROE), currently at 5.1% annualised, with a target of low-to-mid teens at scale. The bank’s relationship-led approach and proactive portfolio management position it well to navigate the evolving economic environment and capitalise on growth opportunities.