Key Highlights

• Gross loans and advances grew 18% to $14.7 billion, while deposits grew 24% to $12.2 billion.

• A higher proportion of deposits, which the company says now exceeds 70% of funding, generally lowers the average cost of funds compared with wholesale markets.

• The more contentious number is the Impairment charge, which rose to $117.7 million on higher specific provisions.

• Judo's common Equity tier 1 (CET1) ratio was 12.4%, which the summary describes as above management's target range.

How does a fast-growing Business bank keep expanding its Loan book while Credit costs remain elevated? Judo Capital Holdings (ASX:JDO) offered its answer on 18 August 2026, when it reported FY26 results showing higher profit, a wider net interest Margin and a lower cost-to-income ratio, alongside an impairment charge that still weighed on earnings. The result matters because the market's debate about Judo is less about growth, which has been consistent, and more about how much of that growth turns into durable returns for shareholders.

The result in context

Gross loans and advances grew 18% to $14.7 billion, while deposits grew 24% to $12.2 billion. Deposits now fund more than 70% of the balance sheet. Those are reported figures, and readers should check them against the original ASX announcement and investor presentation before relying on them.

First, the net interest margin (NIM), which measures the spread earned on interest-bearing assets, was 3.13%, up 20 basis points. Second, the cost-to-income ratio improved by 710 basis points to 45.3%. Together these show operating leverage: income grew faster than the costs of running the bank. For a lender that listed in 2021 while still building scale, that is the central proof point investors have been waiting for.

How the business makes money

Judo is a specialist lender to small and medium-sized enterprises (SMEs). Unlike the major banks, which serve SMEs as one segment among many, Judo built its model around relationship bankers who assess businesses individually, often securing loans against property or other assets. Its Revenue is predominantly net interest income, the difference between what it earns on loans and what it pays for deposits and wholesale funding.

That structure explains why the funding mix matters so much. A higher proportion of deposits, which the company says now exceeds 70% of funding, generally lowers the average cost of funds compared with wholesale markets. A 24% increase in deposits against an 18% increase in loans suggests the funding base has been growing faster than lending, which supports margin stability. Management guided that NIM is expected to hold steady in FY27, so further margin expansion should not be assumed.

Credit costs: the sticking point

The more contentious number is the impairment charge, which rose to $117.7 million on higher specific provisions.

Why does this matter? Because impairment charges consume a large share of pre-provision profit. Using the reported figures, a $117.7 million charge sits against a profit before tax of $168.1 million, so modest movements in credit costs can swing Earnings meaningfully. SME lending is also cyclical: smaller businesses tend to be more sensitive to interest rates, cost Inflation and consumer Demand than large corporates.

Capital and the FY27 guidance

Judo's common equity tier 1 (CET1) ratio was 12.4%, which the summary describes as above management's target range. CET1 is the core measure of regulatory capital strength relative to risk-weighted assets, so a ratio above target suggests room to keep growing loans without raising new equity, at least on current assumptions. Growth consumes capital, however, so the buffer is not unlimited.

For FY27, management guided to profit before tax of $210 million to $220 million, which the article calculates as growth of 25% to 31%, and a Return on Equity of around 8%. An 8% return on equity is below what many investors would regard as the cost of equity for a bank, so the Investment case rests on closing that gap through scale.

Competitive position

Judo competes with the major banks, regional lenders and non-bank financiers in the SME segment. Its advantage is specialisation and speed of decision-making; its disadvantages are a smaller deposit franchise, no large transaction-banking relationships to cross-sell, and a shorter track record through a full credit cycle. As a younger lender, its loan book has had less time to season, which is why credit outcomes receive such close attention.

Risks and developments to monitor

Several items deserve attention over the coming months. The first is the trajectory of impairment charges and non-performing loans: a stable or falling charge would support the FY27 profit guidance, while a rise would put pressure on it. The second is NIM. Guidance implies stability, but competition for both loans and deposits could squeeze it. The third is cost discipline, because the improvement in the cost-to-income ratio to 45.3% is a major contributor to profit growth, and reinvestment needs could slow further gains. The fourth is capital: with CET1 above target, the question is how quickly loan growth absorbs the buffer.

Investors can follow these through the company's regular market updates and its next half-year result.

Bottom line

Judo's FY26 result shows a bank that is gaining scale, funding itself more cheaply and running more efficiently. It also shows that credit costs remain a meaningful drag, and that the return on equity guided for FY27 is still some distance from management's longer-term ambition.