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Judo Bank has reported an 18 per cent increase in its lending book to $14.7 billion for the 2026 financial year ending June 2026 (FY26), up from $12.5 billion in June 2025 and $6.1 billion in June 2022.
The bank saw a 34 per cent increase in profit before tax to $168 million, while statutory profit after tax rose 29 per cent to $111.1 million, up from $86.4 million in FY25.
The SME lender’s customer deposits also increased 24 per cent to $12.2 billion, while its net interest margin rose to 3.13 per cent from 2.93 per cent, and its cost-to-income ratio improved from 52.4 per cent to 45.3 per cent.
Judo Bank’s FY26 result broadly mirrors business lending growth reported in other banks’ quarterly and annual results, with the Commonwealth Bank of Australia, National Australia Bank, and Australia New Zealand Banking Group all posting the strongest growth in their business banking divisions.
Credit pressures emerge
Despite the growth, Judo’s impairment expense increased 56 per cent to $117.7 million in FY26, compared with $75.5 million the previous year.
The bank said the increase reflected higher individually assessed provisions, alongside an increase in its collective provision driven by changes to forward-looking macro-economic assumptions and an overlay for sectors facing increased pressure from the operating environment.
At the end of June, Judo shocked investors with a $20 million increase in credit provisions after three business loans worth $75 million defaulted unexpectedly.
The news sent the bank’s stock down 40 per cent on a single day and has yet to fully recover.
Judo called the provisions increase “disappointing”, but added that “relevant exposures have been reviewed with learnings incorporated.”
Judo’s 90-plus day past due and gross impaired assets increased to 2.90 per cent of gross lending assets, up from 2.43 per cent in FY25.
Loans more than 90 days past due, but not impaired, increased from $118.1 million to $163 million, while gross impaired assets increased to 1.79 per cent of GLA.
Total lending provisions increased to $216.2 million at 30 June 2026, from $185.8 million a year earlier.
Judo Bank’s CEO Chris Bayliss said that FY26 had been a year of “genuine momentum” for the bank.
“While the increase in specific provisions late in the year was disappointing, the underlying performance of the bank has remained strong, with record revenue, continued operating leverage, strong deposit growth and the lending book growing at above-system growth, underpinned by our customer value proposition of smarter judgement, faster decisions, and stronger relationships,” he said.
SME credit demand remains healthy
Judo said business credit demand increased 10.6 per cent over the year to June 2026, despite a more challenging operating environment.
Across Judo’s $14.7 billion loan book, business loans accounted for 78 per cent, followed by home loans at 8 per cent, lines of credit at 7 per cent, equipment loans at 4 per cent, and warehouse lending at 3 per cent.
“Economic momentum has eased through 2026 amid policy tightening, geopolitical uncertainty and higher energy prices. While growth has slowed, labour market trends remained resilient and business credit demand increased 10.6 per cent over the year to June 2026,” the bank said.
It said oil price shocks had also driven a renewed rise in business costs, with some businesses able to pass on higher costs, while others had been unable to fully recover them, putting pressure on margins.
“Economic growth is expected to moderate in FY27 as higher interest rates weigh on activity and geopolitics remains a risk, particularly for energy prices,” Judo said.
Despite these pressures, the bank said demand for SME credit remained healthy as businesses continued to invest in growth and productivity.
“Against this backdrop, Judo continues to see healthy SME credit demand as businesses look to invest in growth and productivity,” it said.
“Given its specialist business model, Judo remains well positioned to deliver disciplined above-system growth, and ongoing improvement in the Bank’s return on equity.”
Focus on brokers and SMEs
Judo said it continued to strengthen its broker proposition during FY26, recognising commercial brokers as a key distribution channel in SME lending.
In the financial year, 71 per cent of Judo’s business was third-party-originated, and the bank now has 1,747 accredited brokers.
Its Broker Black Belt program, launched in early FY26, supports its broker partners, and the bank said it had delivered strong outcomes.
The initial cohort of 14 brokers will be expanded to 19 in FY27, with an average of 22 years of industry experience. The qualification threshold is $50 million of GLA across a minimum of 10 customers.
Judo also had 4,822 SME lending customers at the end of FY26, with an average loan size of $3 million and a lending Net Promoter Score (NPS) of +58.
Judo targets further growth
For FY27, Judo said it was targeting disciplined above-system growth in gross lending assets, with net interest margin expected to remain broadly stable.
It is guiding for profit before tax of between $210 million and $220 million, representing growth of approximately 25 per cent to 31 per cent while targeting a return on equity of around 8 per cent.
Bayliss added that Judo was hoping to capitalise on its technology investments for a strong FY27.
“With major investments in our core technology platforms behind us, we are now focused on delivering operating leverage and driving our return on equity,” he said.
“As we continue to scale the loan book, we are seeing more of our revenue growth translate to profit growth. Our cost to income ratio has improved significantly to now be the lowest in the sector, and we will keep improving as we scale.
“Small and medium-sized businesses are the engine room of the Australian economy. Every dollar we lend to an SME is a dollar backing a business that employs people, invests in its community and drives economic growth and innovation in Australia. That is not incidental to our strategy – it is the reason Judo exists.”
[Related: NAB business lending grows despite signs of borrower stress]
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