Judo Capital Holdings Limited (ASX: JDO) is an Australian challenger bank focused exclusively on serving small and medium-sized enterprises (SMEs). Founded in 2016 and headquartered in Melbourne, Judo distinguishes itself through a relationship-led banking model that prioritises personalised service over traditional retail offerings. The bank provides a range of lending products, including business loans, lines of credit, and equipment finance, and has rapidly expanded its presence across Australia. Judo became the first fully licensed Australian bank dedicated solely to SMEs in over three decades and listed on the ASX in 2021. With a strong focus on technology, risk management, and customer engagement, Judo aims to fill the gap left by major banks in the SME lending market.
Financial Performance: Navigating a Competitive Landscape
Judo Capital Holdings Limited reported its Q3 FY25 results, highlighting a challenging quarter amid increased competition in the SME lending sector. The company experienced subdued net growth in gross loans and advances, attributed to seasonal factors and proactive portfolio management. Despite this, Judo maintained a strong financial position with a Common Equity Tier 1 (CET1) ratio of 13.8% and an improved blended lending margin of 4.3%.
The company’s term deposit balance grew to over $9 billion, reflecting continued customer trust. However, the stock price declined by 16.85% following the earnings call, indicating investor concerns over the slower-than-expected loan growth. Analysts have adjusted their forecasts, with UBS lowering EPS projections across FY25-27 by up to 15% due to the tempered growth outlook.
Judo has revised its FY25 Gross Loan Advances (GLA) guidance to between $12.4 billion and $12.6 billion, down from the previous range of $12.7 billion to $13.0 billion. The company continues to target a 15% profit before tax (PBT) growth for FY25, with an ambitious 50% PBT growth target for FY26, assuming stable economic conditions.
Strategic Initiatives: Focusing on SME Lending and Operational Efficiency
Judo Capital remains committed to its core focus on SME lending, leveraging its relationship-led banking model to differentiate itself in a competitive market. The bank’s proactive portfolio management has resulted in higher run-off rates, particularly in the property, accommodation, and hospitality sectors. However, this approach has also contributed to higher net interest margins and a lower cost of risk.
The company is expanding its national footprint, aiming to operate across 30 locations by June 2025. This geographic expansion is part of Judo’s strategy to deepen its presence in the SME sector and enhance customer engagement. Additionally, Judo is exploring adjacent products to meet more of the lending needs of SMEs, further solidifying its position in the market.
Judo is also investing in technology, particularly in the areas of data analytics and machine learning, to enhance its relationship-led customer proposition and improve operational efficiency. These initiatives are expected to support the bank’s long-term growth and profitability.
Market Positioning: Addressing Investor Concerns and Shareholder Dynamics
Recent share sales by major stakeholders, including Bain Capital and GIC, have raised questions about investor confidence. In March 2025, the two entities offloaded approximately 110 million shares, valued at up to $191 million, at a discount to the prevailing market price. These transactions, while significant, are part of broader portfolio management strategies and do not necessarily reflect the company’s operational performance.
Judo’s management has reiterated its commitment to delivering shareholder value through disciplined capital allocation and strategic growth initiatives. The bank’s focus on maintaining strong capital ratios and investing in technology and geographic expansion is aimed at enhancing its competitive position and long-term profitability.
Despite the challenges, Judo Capital continues to demonstrate resilience and adaptability in a dynamic market environment. The company’s strategic initiatives and operational focus position it well for sustained growth in the SME lending sector.