Judo Capital (ASX:JDO) outlined a step-up in profitability and return metrics in its first-half FY2026 results webcast, pointing to operating leverage from scale, stable margins, and continued above-system lending growth. Management also tightened and upgraded several elements of guidance, while maintaining its full-year profit outlook.
First-half result highlights
CEO Chris Bayliss said FY2026 marks the bank’s 10th year, describing the group’s evolution from writing its first loan as a non-bank in 2018 to becoming a national SME-focused bank with 171 bankers across 32 locations. Bayliss said the balance sheet now includes AUD 13.4 billion of lending and AUD 10.9 billion of deposits, serving nearly 5,000 business customers.
Bayliss said the bank delivered a cost-to-income (CTI) ratio below 50%, consistent with guidance, while continuing “disciplined investment” in growth and productivity. Leslie put first-half CTI at 48.5%, up 60 basis points half-on-half but down 890 basis points compared to the prior corresponding period.
Loan growth, banker expansion, and attrition
Judo’s gross loans and advances rose by AUD 900 million over the half to AUD 13.4 billion. Management said growth was diversified across regions and sectors, with momentum building in warehouse lending as forward-flow lines written last year began drawing.
The bank added 10 bankers during the half (from 161 to 171) and opened a new location in Devonport, with plans to open three additional locations subject to hiring what Bayliss called “the very best banker in town.” Bayliss emphasized that “business banking really is a people business,” while also highlighting that productivity initiatives are beginning to translate into higher banker output.
Bayliss said attrition remains higher than the bank’s “20% thesis,” running around 25%–30% in the immediate short term. He attributed elevated attrition largely to “non-regrettable” exits where economics do not make sense, there is concern about risk, or customers sell assets. He cited two customer exits totaling nearly AUD 100 million in quarter four where “the balance of risk and margin did not make sense.”
Despite elevated attrition, management said it is confident in net growth and upgraded the lower end of June 2026 loan book guidance by AUD 200 million, narrowing the range to AUD 14.4 billion–AUD 14.7 billion.
Margins, deposits, and funding mix
Leslie said first-half net interest margin (NIM) was consistent with prior guidance, and management expects funding tailwinds to flow through in the second half. Judo upgraded its second-half FY2026 NIM guidance to 3.15% from 3.1%, primarily due to improved costs of new deposits and some expected benefit from wholesale funding. For the full year, management said this supports a NIM outcome at the upper end of the previously guided 3.0%–3.1% range, with an at-scale target to manage NIM above 3%.
On deposits, Leslie said the franchise continues to grow, with retail term deposit rollover rates now above 70%. Blended deposit margin increased to 92 basis points in the first half from 87 basis points in the prior period, reflecting the “wash through” of higher-priced term deposits written in the second half of FY2025 amid swap-curve volatility. In contrast, Leslie said new term deposit margins in the first half of FY2026 declined to 78 basis points, slightly below the bank’s through-the-cycle expectation, which remains 80–90 basis points.
The funding stack continued to shift toward deposits, with another AUD 1 billion in deposit growth taking deposits to just under AUD 11 billion, or 69% of total funding. After previously offering only term deposits, the bank is expanding into at-call savings following its core platform transition. Leslie said an intermediated at-call savings product launched last October and a direct online savings account is “launching soon.” In Q&A, Leslie said the bank closed the half with about AUD 50 million in the intermediated savings account and was seeing around AUD 20–25 million of net growth, with the direct offering expected to be a larger source of flows over time.
Management also discussed wholesale funding diversification and pricing improvement. Leslie said Judo issued a new Tier 2 instrument during the half that priced 120 basis points tighter than the previous Tier 2 transaction.
Credit quality, provisioning, capital, and updated guidance
On asset quality, Bayliss said credit performance remains within guidance and thesis, despite a modest increase in over-90-days past due and impaired metrics that he attributed to “the law of small numbers” and a small number of exposures in December across different sectors. In Q&A, he said three-quarters of the movement in over-90-days past due in the period was driven by one customer in the childcare sector, describing it as an established operator with a new greenfield site that had not ramped as quickly as expected. Bayliss said the bank was still supporting the customer and that the exposure was “well secured.”
Leslie reported impairment expense of AUD 40.1 million, or 62 basis points of average GLAs, lower than the prior half, reflecting a slowdown in new impaired loans. Collective provision coverage was 89 basis points and total provision coverage was 1.43% of GLA. New impaired loans were said to be concentrated in more vulnerable sectors where overlays are held, including discretionary retail, manufacturing, and construction. Leslie said the overlay was increased during the half to reflect continued challenges in manufacturing and construction and associated sectors.
Judo ended the half with a CET1 ratio of 12.6%. Leslie said loan growth consumed 90 basis points of CET1, partly offset by 50 basis points of organic capital generation supported by higher profitability. Management reiterated it has options to support growth and optimize capital, including securitization and exploring private structures such as loan sales. In Q&A, management said these would be evaluated through the lens of ROE and “optionality,” and reiterated an “optimized” CET1 level of about 11.5%.
For FY2026, management reiterated and refined guidance, including:
- June 2026 GLA: AUD 14.4 billion–AUD 14.7 billion (lower end upgraded by AUD 200 million)
- 2H FY2026 NIM: approximately 3.15% (upgraded from 3.1%)
- FY2026 CTI: below 50%, with a lower CTI expected in the second half
- Cost of risk: 60–65 basis points
- FY2026 PBT: AUD 180 million–AUD 190 million (unchanged)
Looking ahead, Bayliss said SME trading conditions remained favorable, citing solid economic momentum and capacity constraints—especially skilled labor shortages—driving investment in productivity and ongoing business credit demand. He reiterated the bank’s focus on banker enablement and productivity, including process reengineering and AI-enabled tools, noting gross originations per banker increased from AUD 2.6 million per month in the second half of FY2025 to AUD 2.8 million per month in the first half of FY2026.
Management said it remains confident in progressing toward an at-scale ROE in the low to mid-teens, with Bayliss calling scale “our best friend” as operating leverage builds.
About Judo Capital (ASX:JDO)
Judo Capital Holdings Limited, through its subsidiaries, engages in the provision of various banking products and services for small and medium businesses in Australia. It accepts term deposits; and provides business and agribusiness loans, lines of credit, home loans, residential mortgages, asset financing, equipment loan, and bank guarantees. The company was incorporated in 2016 and is based in Melbourne, Australia.
