The investment around this alternative asset has caught the attention of older investors as the ATO’s SMSF numbers attest, reassured by the entry into the market of established asset managers such as Blackrock and Fidelity.
Labor failed to get its legislation to tax the earnings on SMSF portfolios exceeding $3 million pass the Senate in the previous Parliament. With the Greens likely to support this Bill, it is now set to become law, and advisers are scrambling to devise strategies for their clients.
Judo’s strategic expansion promises shareholder rewards
The business bank dedicated to the SME market, Judo (ASX:JDO), could be a beneficiary of the geopolitical and trade tensions now besetting all economies with the Reserve Bank increasingly likely to cut interest rates as predictions mount of slowing global growth.
When the bank revealed its half-year results to December 31, 2024, it painted an encouraging picture for shareholders as it continued to expand its footprint into the SME lending market while maintaining disciplined financial management.
It achieved a statutory profit before tax of $56.7 million for the half, a substantial 54 per cent increase on the prior half, demonstrating progressive improvement in its underlying financial performance.
Its lending also continued to outpace the broader market, with gross loans and advances growing to $11.6 billion, a nine per cent increase for the half-year. This growth rate is about twice the system growth, according to APRA statistics, signalling Judo’s continued ability to win market share from established competitors.
At the same time, the bank’s regional expansion strategy is gaining momentum, with five new locations established in the half. This geographic diversification, combined with the recruitment of high-quality relationship bankers, has been a key driver of loan book growth.
Notably, the bank has increased its presence in the agribusiness sector, which now accounts for five per cent of the lending book, up from three per cent in December 2023.
While these are all strong numbers, Judo’s exposure to SMEs in the current market turmoil could make it vulnerable to a downturn in lending activity.
There are two plausible arguments to suggest this might not happen. First, if global growth does slow, it increases the likelihood of the Reserve Bank cutting rates – a move that can only benefit Judo. As Chris Bayliss (pictured), chief executive officer and managing director, told shareholders when announcing the interim results, “a falling interest rate environment will also be positive for the SME economy”.
Perhaps more importantly is the fact that in a difficult economic environment of the past few years, the SME sector has remained resilient. Bayliss again. “Throughout the past few years, despite all the challenges, SMEs have shown a willingness to invest in growth and efficiency. The recovery in household finances and consumption is expected to drive improved trading conditions for SMEs.
“With a larger balance sheet, diverse funding and robust capital levels, Judo is well positioned to continue supporting Australian SMEs, whilst scaling to become a world-class SME business bank that delivers a low-to-mid teens return on equity.”
Specifically addressing the first-half-results, he said they demonstrated that Judo continued to execute its clear and simple strategy to scale the bank to meet the needs of more Australian SMEs.
“Our business has strong momentum which positions us well to deliver a significant uplift in earnings in the second half of 2025 through an improved net interest margin and growth in the loan book.”
Looking ahead, Judo has provided clear guidance for the 2025 financial year that suggests continued strong performance. The bank is targeting gross loans and advances of between $12.7 and $13 billion by June 30, 2025, with longer-term aspirations of reaching between $15 and $20 billion.
Cost management remains a focus, with the cost-to-income ratio expected to remain broadly stable compared with 2024 before improving in subsequent periods. The bank is forecasting 15 per cent growth in profit before tax for 2025 compared to 2024, indicating confidence in its business model and market positioning.
For shareholders, the return on equity (ROE) metric is critical. Judo reported an annualised ROE of 5.1 per cent for the half-year, up from 3.1 per cent in the prior half.
