Judo Capital Holdings Limited has reported a robust half-year result, with profit before tax rising 26% over the prior half and 53% year-on-year, driven by strong SME loan book growth and stable net interest margins.
- Profit before tax up 26% half-on-half and 53% year-on-year
- Loan book expands 7% over half to $13.4 billion, 15% year-on-year growth
- Deposit base grows 10% half-on-half to $10.9 billion, funding 69% of assets
- Net interest margin steady at 3.03%, cost-to-income ratio improves significantly
- Capital position remains strong with CET1 ratio at 12.6%, Tier 2 issuance priced tighter
Strong Financial Momentum
Judo Capital Holdings Limited, the ASX-listed parent of Judo Bank, has delivered a compelling half-year performance for the six months ended 31 December 2025. The bank reported a profit before tax (PBT) of $86.5 million, marking a 26% increase from the previous half and a striking 53% rise compared to the same period last year. This growth underscores Judo’s successful strategy in scaling its specialist SME lending franchise.
The loan book grew by 7% over the half to $13.4 billion, representing a 15% increase year-on-year, outpacing system growth. This expansion was supported by strong origination momentum across metropolitan, regional, and agribusiness sectors, as well as the continued development of its warehouse lending program. Deposits, a critical funding pillar, rose 10% over the half to $10.9 billion, now constituting 69% of total funding, up from 68% six months prior.
Stable Margins and Operational Efficiency
Despite a competitive funding environment, Judo maintained a stable net interest margin (NIM) of 3.03%, virtually unchanged from 3.04% in the prior half. The bank’s disciplined funding mix, including the launch of its Intermediated Savings Account (ISA) and improved pricing on term deposits, helped offset margin pressures from higher deposit costs and a modest shift in lending mix.
Operating expenses increased moderately by 12% half-on-half, driven primarily by wage inflation, increased headcount, and investments in technology and marketing. However, the cost-to-income ratio (CTI) improved significantly year-on-year to 48.5%, reflecting the operating leverage inherent in Judo’s business model as it scales.
Credit Quality and Capital Strength
Credit impairment charges declined by 14% to $40.1 million, supported by lower individually assessed provisions. Total provisions increased slightly to $192.1 million, reflecting loan book growth and portfolio seasoning. The ratio of loans 90+ days past due and impaired assets rose modestly to 2.66% of gross loans and advances, warranting ongoing monitoring.
Judo’s capital position remains robust, with a Common Equity Tier 1 (CET1) ratio of 12.6%, down 50 basis points from June 2025 due to loan growth but partly offset by organic capital generation. The bank successfully issued $150 million in Tier 2 subordinated notes at pricing 120 basis points tighter than its previous issuance, enhancing capital flexibility and cost efficiency.
Outlook and Strategic Focus
Looking ahead, Judo expects continued strong lending growth, targeting a loan book between $14.4 billion and $14.7 billion by the end of FY26. The bank anticipates maintaining NIM at the upper end of 3.00% to 3.10%, with cost-to-income ratio improving further in the second half. Profit before tax guidance is set between $180 million and $190 million, with return on equity projected in the low-to-mid teens.
Judo’s commitment to relationship-led SME banking, combined with its expanding product suite and funding diversification, positions it well to capitalise on the resilient Australian SME sector despite ongoing economic uncertainties. The bank continues to invest in technology and talent to drive productivity and customer satisfaction, aiming to solidify its status as Australia’s most trusted SME business bank.
Bottom Line?
Judo’s strong half-year results and strategic initiatives set the stage for sustained growth, but credit quality trends and economic headwinds remain key watchpoints.
Questions in the middle?
- How will Judo manage credit risk amid rising 90+ days past due loans?
- What impact will the new deposit products have on funding costs and customer acquisition?
- Can Judo sustain its operating leverage while investing in growth and technology?