Judo Revises FY25 Loan Growth Amid Market Volatility, Targets 15% Profit Rise

Operational Progress Amid Market Challenges

Judo Capital Holdings Limited (ASX:JDO) has provided a detailed update on its financial performance and outlook as of 31 March 2025, underscoring a period of both strategic advancement and cautious recalibration. The bank continues to execute its relationship-led growth strategy, expanding its footprint with 158 relationship bankers across 27 locations, on track for 31 by June. This expansion supports Judo’s commitment to delivering personalised service to SMEs, reflected in a market-leading net promoter score of +51 and a favourable customer-to-banker ratio well below industry norms.

Significant technological upgrades were completed with the migration to a new core deposit platform, enhancing product flexibility and marking the culmination of a year-long overhaul of Judo’s core systems. These enterprise-grade platforms position the bank for scalable growth and operational efficiency.

Financial Performance and Margin Stability

Despite subdued net loan growth in the March quarter, influenced by typical seasonality and portfolio management actions, Judo’s lending margins remain robust. New lending margins held at 4.6%, contributing to a blended lending margin of 4.3% for the quarter. The bank’s AAA lending pipeline has expanded significantly to $1.6 billion, with attractive average margins in the mid-400 basis points over 1-month BBSW.

Term deposits grew to $9.2 billion, with deposit costs aligning with the bank’s through-the-cycle expectations. Net interest margin (NIM) for Q3 remained within the targeted 2H25 range of 2.90% to 3.00%, demonstrating disciplined liquidity and funding management despite recent market volatility causing temporary margin dislocations.

Revised Growth Outlook and Risk Considerations

Judo has moderated its gross loans and advances (GLA) guidance for FY25 to a range of $12.4 billion to $12.6 billion, down from previous forecasts. This revision reflects heightened market uncertainty impacting customer demand, a slower-than-anticipated ramp-up in warehouse lending, and a strategic emphasis on balancing growth with economic returns.

Credit quality metrics have shown some deterioration, with 90 days past due and impaired loans rising modestly to 2.46% of GLA. This increase is driven by specific provisioning for exposures in vulnerable sectors, prompting the bank to anticipate a higher cost of risk expense for FY25 compared to FY24.

Expense Management and Capital Strength

Operating expenses continue to be tightly managed, with growth slowing in Q3 as expected. Judo now projects its FY25 cost-to-income ratio to be lower than FY24, benefiting from disciplined expense control even as wage inflation and competitive pressures on front-line staff are factored into FY26 planning.

The bank maintains a strong capital position, with a CET1 ratio of 13.8% as at 31 March, providing a solid buffer to support future growth and absorb potential credit shocks.

Looking Ahead

Despite the near-term challenges, Judo remains confident in its medium-term trajectory, targeting 15% profit before tax growth for FY25 and a substantial 50% increase in FY26, driven by operating leverage as recent investments in technology and operations mature. The bank’s leadership acknowledges ongoing market volatility but emphasizes the resilience of its business model and the strategic discipline underpinning its outlook.