Judo Bank Surges 54% in Profit Before Tax on SME Loan Growth
Judo Capital Holdings Limited reported a robust 54% increase in statutory profit before tax for the half year ended December 2024, driven by strong SME loan growth and prudent cost management, despite a slight dip in net interest margin and statutory profit after tax.
- Statutory profit before tax rose 54% to $56.7 million
- Gross loans and advances grew 9% to $11.6 billion
- Net interest margin slightly declined to 2.81%
- No interim dividend declared for the period
- Common Equity Tier 1 ratio decreased to 13.8%
Strong Profit Growth Driven by SME Lending Expansion
Judo Capital Holdings Limited, the parent company of Judo Bank, has delivered a strong operational performance in the first half of fiscal 2025, reporting a statutory profit before tax (PBT) of $56.7 million. This represents a significant 54% increase compared to the prior half-year period, underscoring the bank's successful strategy of scaling its specialist SME lending franchise.
The growth in PBT was supported by a 9% increase in gross loans and advances (GLA), which reached $11.6 billion. This expansion outpaced system growth by two times, reflecting strong demand for Judo’s differentiated lending proposition and its ongoing regional expansion, with five new locations added during the period. The bank’s focus on relationship-led lending and disciplined pricing has maintained average margins on new lending above 450 basis points over the 1-month bank bill swap rate.
Margin Pressure and Cost Management
Despite the growth in lending, Judo experienced a slight decline in net interest margin (NIM), which fell by 4 basis points to 2.81%. This was primarily due to the residual impact of refinancing the Term Funding Facility (TFF), which had provided a one-off benefit in the prior half. However, the bank managed to offset some margin pressure through improved lending margins, optimized wholesale funding costs, and better yields on liquid assets.
Operating expenses increased modestly by 4% to $115.4 million, driven mainly by wage inflation and higher IT licensing costs associated with new systems. The cost-to-income ratio rose slightly to 57.4%, reflecting the bank’s continued investment in growth and technology, while maintaining a focus on operational efficiency.
Asset Quality and Capital Position
Judo’s asset quality remained stable, with impairment expenses decreasing by 33% to $28.8 million, benefitting from proactive portfolio management and a lower rate of new impairments. The ratio of 90+ days past due and impaired assets held steady at 2.30% of GLA.
Capital adequacy remains robust, with a Common Equity Tier 1 (CET1) ratio of 13.8%, down from 14.7% due to loan book growth and increased risk-weighted assets. The bank’s total capital ratio held steady at 17.5%, supported by a recent $125 million Tier 2 subordinated debt issuance.
Dividend Policy and Outlook
Consistent with its growth strategy, Judo did not declare an interim dividend, opting to reinvest earnings to support future expansion. The bank’s management expects continued strong lending growth, targeting a gross loan book of $12.7 billion to $13.0 billion by the end of fiscal 2025, with a gradual improvement in net interest margin in the second half.
Looking ahead, Judo aims to demonstrate clear operating leverage from the second half of 2025, targeting a low- to mid-teens return on equity and sustained profitability growth, while navigating varied business conditions and evolving market dynamics.
Bottom Line?
Judo Bank’s half-year results highlight its growing foothold in SME banking, but margin pressures and capital demands will test its path to sustained profitability.
Questions in the middle?
- How will Judo manage margin compression amid evolving funding costs?
- What impact will the absence of dividends have on investor sentiment?
- Can Judo sustain asset quality while aggressively expanding its loan book?
