Judo Bank Projects FY26 Cost of Risk at $116m-$122m with Lending Growth Above $14.6bn

Rising Cost of Risk Reflects Specific Customer Challenges

Judo Bank (ASX:JDO) has revised its FY26 cost of risk upwards to between $116 million and $122 million, driven by three individual customer exposures across different sectors. These exposures, which emerged after a detailed customer review in Q3, have increased specific provisions and pushed expected 90-days-past-due and impaired loans to about 3% of gross loans and advances (GLA) by June 30. Despite this, the bank’s collective provision coverage remains steady at around 94 basis points of GLA, reflecting a cautious overlay for ongoing macroeconomic uncertainty.

Lending Growth and Margins Remain Robust

Judo continues to demonstrate strong lending momentum, with GLA surpassing $14.4 billion as of late June and expected to close FY26 between $14.6 billion and $14.7 billion. The bank’s net interest margin (NIM) for the second half is now anticipated to exceed 3.2%, slightly higher than prior guidance, buoyed by favourable term deposit costs. Lending margins on new business remained stable at 4.2% over the 1-month BBSW benchmark through April and May, while the AAA-rated lending pipeline stood firm at $2.4 billion with a margin of 4.3% at the end of May.

Operating Efficiency and Profit Growth Outlook

Operating costs continue to be managed prudently, with the cost-to-income ratio (CTI) for 2H26 expected to improve on the first half’s 48.5%. As a result of these factors, Judo now forecasts FY26 profit before tax (PBT) in the range of $163 million to $169 million, representing approximately 30% growth compared to FY25. Looking ahead, the bank has set FY27 PBT guidance between $210 million and $220 million, aiming to sustain a similar growth trajectory despite ongoing macroeconomic and geopolitical uncertainties.

Capital Position and Management Targets

Judo’s capital position remains strong, with an expected Common Equity Tier 1 (CET1) ratio of around 12.4% as of June 30, 2026. This includes the impact of a recently completed capital relief term securitisation transaction, which provides additional flexibility in capital management. The bank plans to shift to a management CET1 target range of 11.0% to 12.0% under normal conditions, signalling confidence in its capital buffers and profitability. CEO Chris Bayliss acknowledged the disappointment of the recent credit deterioration but emphasised the bank’s solid underlying business, customer value proposition, and clear path to achieving a return on equity in the low-to-mid teens.

Upcoming Result and Investor Engagement

Judo Bank’s full FY26 results are scheduled for release on August 18, 2026. An investor and analyst briefing was held on June 25, providing further insights into the bank’s performance and outlook.