Highlights

  • Macquarie assigns outperform rating with AUD 1.85 target; Jefferies issues buy rating with AUD 2.32 target
  • Strong 3Q26 performance with lending growth, margin expansion, and stable asset quality
  • FY26 guidance reaffirmed despite higher provisioning amid macro uncertainty

Shares of Judo Capital Holdings Limited (ASX:JDO) were recently trading at $1.437, up 2.68% in the latest session. The upward movement reflects improved investor sentiment following the company’s trading update and supportive broker commentary.

With a market capitalisation of approximately $1.56 billion, Judo Capital continues to position itself as a growing player in Australia’s banking sector, particularly focused on small and medium-sized enterprise (SME) lending. Trading volumes have remained elevated, suggesting increased market engagement following the latest update.

Dual Broker Support Signals Growing Market Confidence

Recent ratings from Macquarie Group and Jefferies highlight a constructive outlook for Judo Capital.

Macquarie has maintained an outperform rating with a target price of AUD 1.85, while Jefferies has issued a buy rating with a higher target of AUD 2.32. The presence of two major broker endorsements suggests increasing institutional confidence in the company’s growth strategy and operational execution.

Lending Growth Remains a Core Driver

Judo Capital’s business model is centred on relationship-based lending to SMEs, a segment that remains underserved by traditional banks. The company reported gross loans and advances of $13.8 billion as of March 2026, up from $13.4 billion in December 2025.

This growth has been supported by strong loan originations and a notable improvement in attrition rates, which declined significantly during the quarter. Lower levels of refinancing activity and discretionary repayments contributed to this trend, enabling the company to retain a larger portion of its loan book.

The lending pipeline also remains robust, with approved and in-progress loans reaching $2.2 billion. This pipeline provides visibility into future growth and supports the company’s guidance for continued expansion through FY26.

Margin Expansion and Funding Dynamics

Net interest margin (NIM), a key profitability metric for banks, improved to approximately 3.15% in the third quarter, up from 3.03% in the first half of FY26. This increase aligns with the company’s guidance for margins to trend toward the upper end of its target range.

Lending margins remained strong at around 4.2%, reflecting disciplined pricing and a favourable mix of lending activities. At the same time, funding costs have benefited from lower-cost term deposits and the introduction of new savings products.

The launch of at-call savings accounts, including the Direct Online Savings Account and Intermediated Savings Account, has contributed to deposit growth and diversification. Total deposits reached $11.5 billion, with the cost of deposits remaining below the company’s long-term expectations during the quarter.

Looking ahead, management expects deposit pricing to normalise as interest rate conditions evolve, which may influence margin dynamics in future periods.

Asset Quality Remains Stable Amid Economic Uncertainty

A key area of focus for investors has been asset quality, particularly given the uncertain macroeconomic environment. Judo Capital reported stable asset quality metrics, with 90-days-past-due and impaired loans at 2.65% of gross loans and advances, broadly unchanged from the previous quarter.

The company undertook a detailed review of its loan portfolio, assessing each customer individually. This process confirmed that the majority of borrowers remain in good financial health, with no significant deterioration in risk profiles.

However, the bank has taken a prudent approach by increasing its provisions for expected credit losses. This includes an additional overlay for sectors that may be more sensitive to economic conditions, such as agriculture, construction, and manufacturing.

While this increase in provisioning impacts short-term profitability, it reflects a cautious stance aimed at strengthening the balance sheet and preparing for potential risks.

FY26 Guidance Reaffirmed with Cautious Adjustments

Despite the higher provisioning, Judo Capital has reaffirmed its FY26 guidance for profit before tax in the range of $180 million to $190 million. The company indicated that results are likely to come in toward the lower end of this range, primarily due to the increased credit provisions.

Other key guidance metrics remain intact, including expectations for continued lending growth, stable margins, and improved cost efficiency. The company’s cost-to-income ratio is expected to improve in the second half, reflecting operating leverage as revenue grows faster than expenses.

The cost of risk is now forecast to be between 70 and 75 basis points, incorporating the additional provisioning measures. This compares with a lower long-term target, indicating a temporary elevation due to current economic conditions.

Overall, the guidance suggests that the company remains on track operationally, even as it adopts a more conservative approach to risk management.

Capital Position and Operational Efficiency

Judo Capital continues to maintain a strong capital position, with a Common Equity Tier 1 (CET1) ratio of 12.6%. This level of capital provides a buffer to support ongoing growth while maintaining regulatory compliance.

Operating expenses have remained well controlled, in line with prior guidance. The company’s focus on productivity and efficiency is expected to drive further improvements in cost metrics over time.

The combination of strong capital, disciplined cost management, and scalable operations underpins the company’s strategy to achieve its long-term return on equity targets.

Strategic Positioning in the SME Lending Market

Judo Capital’s focus on SME lending differentiates it from larger, more diversified banks. Its relationship-driven model, characterised by a lower ratio of customers to bankers, aims to provide tailored financial solutions and build long-term client relationships.

This approach has enabled the company to carve out a niche in the Australian banking landscape, particularly among businesses seeking more personalised service. As economic conditions evolve, the ability to maintain close relationships with customers may prove advantageous in managing credit risk and identifying growth opportunities.

At the same time, the SME segment can be more sensitive to economic cycles, making risk management and provisioning critical components of the company’s strategy.

Conclusion

Judo Capital Holdings Limited’s latest update highlights a bank that is continuing to execute on its growth strategy while maintaining a cautious approach to risk. Strong lending growth, improving margins, and stable asset quality underpin its operational performance, while increased provisioning reflects a prudent response to macroeconomic uncertainty.

Support from both Macquarie and Jefferies reinforces confidence in the company’s outlook, with broker ratings pointing to potential upside. The reaffirmation of FY26 guidance, despite higher provisions, further demonstrates resilience in the business model.

As Judo continues to scale its operations and expand its presence in the SME lending market, its ability to balance growth with risk management will remain central to its performance and investor perception.