Judo Bank sees pressure from interest rates, inflation, after posting $70m profit

Judo Bank is now targeting regional areas as it seeks to grow its loan book beyond $10.7bn.

Judo Bank is now targeting regional areas as it seeks to grow its loan book beyond $10.7bn.

Judo Bank has ruled off a slight fall in annual profit after tax to $70m, just topping expectations, amid a 5 per cent drop in earnings.

The small business lender, founded in 2016, was dogged by organisational restructure costs which saw its returns sliced.

But Judo Bank lifted its underlying profit before tax by 2 per cent, to $107.5m.

Analysts had tipped the business lender would deliver $69m in cash earnings, in a result weighted towards Judo Bank’s $46m first-half profit.

Judo reported its net interest margin, or the core measure of its lending profitability, declined to 2.85 per cent from 3.02 per cent reported in the first half.

Analysts had expected Judo to report a net interest margin of 2.77 per cent.

Judo chief executive Chris Bayliss said the bank had seen “another year of strong financial and operational performance”.

Judo said its results had met or exceeded its 2024 guidance.

Judo Bank CEO Chris Bayliss. Photo: Supplied

Mr Bayliss said Judo had achieved lending growth topping 130 per cent per annum since obtaining a banking licence in April 2019.

Total loans and advances climbed 20 per cent in the period to $10.7bn.

“Our above-system growth is supported by our unique customer value proposition, which continues to resonate with SME customers, evidenced by our sector-leading net

promoter score,” Mr Bayliss said.

Arrears were also down on March levels, flattening from 2.63 per cent of loans to 2.31 per cent in June.

“We will also continue to provide support and seek optimal resolutions for any customers encountering challenges,” Mr Bayliss said.

Judo said Australia’s economy was proving resilient, but noted some companies and sectors were experiencing stress with higher inflation and interest rates.

Judo reported it had refinanced its share of the Term Funding Facility, wholesale borrowing secured from the Reserve Bank of Australia during the Covid-19 pandemic.

Deposit funding grew to $8.2bn, lifting $2.2bn over the year, taking total deposit funding to almost two thirds of all cash needs.

Judo told investors it would now seek to grow its deposit funding to 75 per cent of its cash needs.

The bank told investors it would hire a further 20 bankers in 10 new locations by June 2025 as it pursued growth.

Mr Bayliss said Judo was focusing on expanding to regional areas combined with investments in technology.

Judo also told investors it would hold the growth in its cost to income growth at a slow pace.

The lender told investors it would reconfirm its 2025 target of a 15 per cent growth in profits before tax, with a NIM in the 2.8 to 2.9 per cent range.

Judo did not declare a dividend.

Its shares closed on Monday at $1.38 each.