Highlights

  • Judo Bank (ASX:JDO) delivered FY26 profit growth, supported by Loan expansion, stronger margins and improved operating efficiency.
  • Gross loans and advances increased to $14.7 billion, approaching the lower end of the bank’s long-term scale target.
  • Deposits exceeded $12 billion, strengthening funding stability and reducing reliance on wholesale markets.
  • FY27 guidance points to further Earnings growth as the bank continues expanding its SME lending platform.

Judo Bank (ASX:JDO) has continued expanding its position as a specialist lender to small and medium-sized businesses, delivering its strongest annual result since listing.

The bank’s FY26 performance reflected the benefits of scale, improved Operating Leverage and continued Demand for relationship-based SME lending. While profitability improved significantly, investors remain focused on maintaining Credit quality, managing Capital requirements and sustaining growth as the loan book approaches its targeted scale.

FY26 Performance

Judo Bank reported profit before tax of $168.1 million for FY26, increasing 34% from $125.6 million in the previous year.

Statutory net profit after tax increased 29% to $111.1 million, compared with $86.4 million in FY25.

Gross loans and advances reached $14.7 billion at 30 June 2026, representing growth of 18% from $12.5 billion a year earlier.

The improvement was supported by stronger lending activity, Margin expansion and improved cost efficiency as the bank continued scaling its operations.

Earnings per share increased 29% to 9.9 cents, reflecting the improvement in profitability.

Margin Expansion

A key contributor to Judo’s FY26 performance was improved net interest margin.

Full-year net interest margin was 3.13%, while the second half margin increased to 3.23%, supported by lending growth and improved funding conditions.

The bank also improved operational efficiency, with the cost-to-income ratio reducing to 45.3% from 52.4% in the previous year.

Return on equity increased to 6.4%, although this remains below Judo’s longer-term ambition of achieving low-to-mid-teens returns.

The bank continued investing in its relationship banking model, with operating scale helping spread costs across a larger lending base.

Funding Strength

Judo continued strengthening its funding profile during FY26.

Deposits increased 24% to $12.2 billion, providing funding for approximately 71% of the balance sheet.

The growth in deposits has reduced reliance on wholesale funding sources and supported greater funding flexibility.

The bank expanded its deposit offering through products including Intermediated Savings Accounts and Direct Online Savings Accounts.

Deposit retention also improved, with the term deposit rollover rate increasing to 73% during the second half.

SME Growth Strategy

Judo’s core strategy remains focused on providing relationship-based lending solutions to Australian SMEs.

The bank expanded its network of relationship bankers and broker partnerships during FY26, supporting growth in customer relationships.

The company reported growth in its customer base, with thousands of Business groups now supported through its specialist lending model.

Unlike traditional automated lending approaches, Judo focuses on direct relationships with business owners, aiming to provide more tailored lending solutions.

This approach remains central to the bank’s strategy as it continues competing for SME lending opportunities.

Long-Term Targets

Judo reiterated its long-term “metrics at scale” framework, which includes targets for loan growth, margins, efficiency and returns.

The framework includes gross loans and advances of $15 billion to $20 billion, net interest margin above 3%, a cost-to-income ratio approaching 30%, cost of risk around 50 basis points and Return on Equity in the low-to-mid teens.

With the loan book already at $14.7 billion, Judo is approaching the lower end of its lending scale objective.

However, achieving its return targets will require continued earnings growth, disciplined credit management and further improvements in operating efficiency.

FY27 Outlook

Judo Bank has provided FY27 profit before tax guidance of $210 million to $220 million.

The guidance implies continued earnings growth, supported by further scale benefits, stable margins and ongoing efficiency improvements.

Management expects return on equity to improve towards approximately 8% during FY27.

Investors will continue monitoring whether loan growth can continue without pressure on credit quality, particularly as the lending portfolio becomes larger.

Key Focus Areas

Credit performance remains a major focus as Judo continues expanding its SME lending exposure.

The bank reported Impairment charges of $117.7 million during FY26, while arrears and impaired assets represented 2.90% of gross loans.

Investors will also watch capital trends, particularly the common equity tier 1 ratio, which declined to 12.4% during FY26 as the Balance Sheet expanded.

Maintaining strong funding access, managing deposit costs and improving profitability will remain important priorities.

Risks

Judo Bank’s business model carries risks associated with SME lending, which can be more sensitive to economic conditions compared with traditional residential lending.

A deterioration in business conditions could increase arrears, impairments and credit losses across the loan portfolio.

Funding costs remain another consideration, as changes in deposit competition and wholesale market conditions could affect margins.

The bank’s expanding balance sheet also requires careful capital management to support continued growth.

As a smaller banking institution, Judo may experience greater earnings and share price Volatility compared with larger financial institutions.

Future Outlook

Judo Bank enters FY27 with a larger lending platform, stronger profitability and improving operating leverage.

The FY26 result demonstrates progress in scaling its specialist SME banking model, with loan growth, margin expansion and cost efficiency contributing to stronger earnings.

The next stage of growth will depend on maintaining credit discipline while continuing to expand the lending platform.

If Judo can achieve further scale without compromising asset quality, the bank’s long-term targets around profitability and returns could become increasingly achievable.