How Judo Bank Plans to Hit Low-to-Mid Teens ROE by FY26

Judo’s Strategic Evolution – From Scaling to Optimizing

Judo Capital Holdings Limited (ASX – JDO), the specialist SME business bank, convened its 2025 Investor Day in Sydney to provide a comprehensive update on its strategic progress and financial outlook. CEO Chris Bayliss emphasized that the bank has largely completed its scaling phase and is now entering a critical optimization stage aimed at unlocking operating leverage and delivering sector-leading returns.

Built from a blank slate without legacy constraints, Judo’s business model is uniquely tailored to serve small and medium enterprises (SMEs) through a judgement-based lending approach. This model, combined with a strong employee value proposition and a modern technology stack, positions Judo to differentiate itself in a competitive banking landscape.

Financial Targets and Growth Trajectory

Judo confirmed its FY25 guidance remains unchanged, targeting gross loans and advances (GLA) between $12.4 billion and $12.6 billion. The bank expects its net interest margin (NIM) to gradually improve, reaching 3% by the end of June 2025, supported by a diversified funding stack with an increasing proportion of deposits expected to comprise 75% of total funding at scale.

Operating expenses are forecasted to grow moderately, with cost-to-income ratio (CTI) improvements anticipated in the second half of FY25 as revenue growth outpaces cost increases. The bank is targeting a 15% increase in profit before tax (PBT) for FY25, with a more ambitious 50% PBT growth expected in FY26, reflecting the benefits of operating leverage as the bank matures.

Competitive Advantages and Market Opportunities

Judo’s competitive edge lies in its relationship-driven, judgement-based lending model, which empowers experienced bankers to assess SME risk profiles with speed and flexibility. This approach contrasts with the probability-based credit models used by incumbent banks and allows Judo to tailor loan structures to individual business needs.

The bank’s total addressable market (TAM) for SME lending has expanded to $814 billion in 2025, up from $605 billion in 2021, driven by growth in business credit demand and entry into agribusiness and warehouse lending segments. Despite this, Judo currently holds only about 1.5% market share, indicating significant room for growth through new products and geographic expansion.

Technology and Talent as Growth Enablers

Judo has completed a major technology re-platforming, migrating to a cloud-based, flexible stack that supports scalable growth and enhances banker productivity. Investments in AI are underway to automate data collection and credit memo preparation, further streamlining lending processes.

On the human capital front, Judo prides itself on being a leading employer for SME bankers, with a unique remuneration framework that eschews individual sales targets in favor of teamwork and disciplined risk management. The bank’s low attrition rates and high employee engagement scores underscore the strength of its culture.

Risk Management and Funding Diversification

Risk management remains a cornerstone of Judo’s strategy, with a proactive framework that balances growth with portfolio quality. The bank maintains sector concentration limits and a through-the-cycle cost of risk assumption of approximately 0.5% per annum.

Funding diversification is progressing, with term deposits growing to around $9.6 billion and new savings products planned to broaden the deposit base and reduce reliance on wholesale funding. This evolution supports Judo’s goal of achieving a net interest margin above 3% at scale.