Good morning, and welcome to the Judo Bank first half '26 results webcast. My name's Andrew Dempster, I'm the GM of Strategy and Investor Relations at Judo.

I'd like to begin today by acknowledging the traditional owners of the land from which we all are joining today, and we're going to follow our usual format this morning. Firstly, we're going to hear from our CEO, Chris Bayliss, who will give an overview of our performance.

Secondly, our CFO, Andrew Leslie, will give an update on our detailed financial performance, and then Chris will return to discuss the outlook and guidance. We'll then open up the lines for Q&A, and also letting you know that our documents have been lodged with the ASX this morning.

The webcast is going to be recorded and will be available later today on our website. On that note, I'll now hand to Chris.

Thank you, Andrew, and good morning, everybody. I'm very pleased to be joining you this morning to present our first half results for FY '26.

Now, 2026 is a significant milestone for us, marking the 10th year of our journey. Over this time, we have progressed from literally a blank piece of paper in 2016, writing our first loan as a non-bank in 2018, to now a national business bank with a market-leading CVP.

In 2019, we obtained a full banking license that hadn't been awarded for many decades, and in 2021, we were the first bank to list on the ASX since Macquarie in 1996. In these 10 years, we have scaled with 171 bankers in 32 locations, and we now have a balance sheet that sits with $13.4 billion of lending and $10.9 billion of deposits.

We have nearly 5,000 business customers and believe we have made a meaningful difference to how they access the funding that they need and deserve. I'm often asked, what was the most significant challenge of the last 10 years?

Without doubt, it was finding the intersection between a clear vision, converting that into an investment thesis, and operating as a regulated ADI. Initially, we traded off a lot of the investments in technology and process design to control our cost base and to get to profitability quickly.

It's very rewarding to stand here today with all our strategic, scalable, AI-enabled technology in place. We are now focused on delivering productivity improvements to our bankers, more flexibility and better experiences to our customers, and operating leverage to our shareholders.

Navigating the last 10 years has been complex and has not been a straight line. For example, we didn't expect a pandemic, but overall, we have successfully executed every one of the strategic priorities we architected in 2016.

We're proud that as a bank that is just 10 years old, our CTI ratio is better than all the regional banks and two of the majors, and we're not far behind the other two, giving us clear line of sight having the best CTI in the sector. The operating leverage we are delivering means we also have the highest earnings growth in the sector.

In summary, as we celebrate the 10th year of Judo, we are confident we can deliver an ROE in the low to mid-teens, which will be the strongest of all listed banks in Australia. Now to the service profit chain.

This slide is always at the beginning of my presentation because it remains at the core of how we operate the bank. We watch these metrics like a hawk.

The core premise of this philosophy is that engaged employees will deliver satisfied customers, these build your brand, and in turn deliver great results for shareholders. Our employee engagement remains strong as we continue to invest in our culture.

This metric is actually so important to us that we measure it weekly, and it's continued to translate into very happy customers, with our lending and deposit NPS remaining sector-leading. For me personally, I'm delighted that we've been able to sustain this level of customer satisfaction as we've scaled, reflecting that the customer obsession is now embedded into our DNA, and hopefully our Valentine's Day marketing campaign at the weekend demonstrated just how much we love our customers.

The resulting ROE and EPS improvement show the model is working. ROE has improved 180 basis points year on year, and EPS is up 46% year on year.

Few other companies can claim these numbers, particularly amongst listed banks. In summary, we have a clear and simple strategy, which continues to prioritize culture as a competitive advantage, leading to high customer satisfaction, underpinning continued revenue and profit growth.

Now to the results. We have delivered a first half PBT of $86.5 million, which is up 26% half on half and up 53% versus the prior corresponding period.

This is the operating leverage I talked about earlier. We've continued to deliver above-system lending growth, underpinned by our clearly differentiated CVP, growth in banker numbers, and productivity initiatives.

Our NIM was broadly stable, in line with our guidance, but tailwinds from cheaper funding costs will now flow through into the second half of the financial year. Andrew will talk more about this later.

We have delivered CTI below 50%, also in line with our guidance, balancing cost control with disciplined investment in growth and productivity. Credit quality remains in line with guidance and within thesis.

Combined, I'm delighted that all these core metrics have led to material profit growth and a significant step up in ROE, putting us on a clear trajectory to our at-scale target. Now to lending growth.

As I've already stated, our loan book sits at $13.4 billion, up $900 million over the half. Pleasingly, our growth is well diversified across regions and sectors, and we're seeing strong momentum in warehouse lending now that a number of the forward flow lines we wrote last year are starting to draw.

We continue to attract the very best bankers in the market, with the total number increasing from 161 to 171 in the half. If there's actually one aspect of our business I'm personally most proud of, it's the talent that chooses to come and work for us.

Our employment brand really is second to none. We've also just opened another location in Devonport and have plans to open three additional locations as our geographic expansion continues.

We are, however, very deliberate in opening new locations and will only go there if we can attract the very best banker in town. Business banking really is a people business.

We also continue to accredit more commercial brokers who are educated in Judo's risk appetite. We provide a unique proposition to commercial brokers, which has continued to evolve with the launch of Broker Black Belt.

This is already delivering high growth from these brokers, and it's important to know that in a system of over 20,000 brokers, we only work with the top 10%. This is very different to how the system for home loan broking works.

Our risk assessment practices for broker-introduced and direct business are identical. In terms of blended lending margins, despite continued competition, they remain broadly flat as we manage all the levers to achieve the optimal balance of growth and economics.

I want to now spend a moment on the component parts of growth: gross originations and attrition. I don't think anyone would dispute we are an origination machine.

We excel with the speed at which we operate, how we think about structuring loans, our approach to how we assess risk under our 4Cs framework, and that every customer gets to meet the decision maker. When a customer wants a new, increased, or changed facility, we're in our sweet spot.

Our gross originations were very strong over the half, particularly leading up to Christmas, which is a key deadline for businesses. In fact, in December, we set a new 10-year record for gross drawdowns.

With 32 locations, we've seen growth nationally. In particular, are we seeing our investment into the regions translate into strong growth, with agri lending now representing 8% of our book, up 23% half on half.

As I said earlier, warehouse lending is also gathering steam, with several new customers onboarded over the half. On a state basis, WA and SA have really been our top performers.

We're also seeing our investments in productivity to begin to deliver results. We have moved from building technology to optimizing it, and this is now translating to bankers having more time to spend with customers and drive growth.

On the other side of the equation, attrition does remain more elevated than our 20% thesis for a range of reasons. We have a detailed understanding of why customers leave, and the step up in attrition is largely due to three non-regrettable factors.

First, the economics don't make sense, or second, there's a concern about the risk, or third, there's quite simply just an asset sale. For example, attrition in quarter four included two well-flagged customer exits, totaling nearly $100 million, where the balance of risk and margin did not make sense for us.

For these reasons, in this environment, attrition feels more like 25% to 30% in the immediate short term. We continue to believe 20% is the right through-the-cycle assumption, and we've simply not prepared to compromise on the economics of our book because we don't need to.

At 2% market share, we can balance attrition with higher originations because internally, we simply focus on producing the desired net growth sculpted to the optimization of our capital. Pleasingly, with our new technology platforms, our bankers are able to deliver the higher originations without it impacting our cost base.

Accordingly, this confidence in our net growth, supported by the strong momentum we have in our pipeline, has led us to upgrade the lower end of our June '26 GLA guidance by $200 million, with the revised range of $14.4 billion to $14.7 billion. Lastly, before handing to Andrew, let me discuss asset quality.

Overall, the book is performing in line with guidance and our thesis. We did see a modest increase in our over 90 days past due and impaired, but this really is just the law of small numbers still driving volatility with a below-scale denominator.

The increase in particular was driven by a small number of exposures in December across different sectors. There are no systemic issues across the portfolio that cause me any concern.

I would also stress these metrics are reported on a gross basis, agnostic of the underlying security, and also reflect a point in the cycle where we are still seeing the wash-through of customers who face challenges during the downturn. To underscore this point, as the top chart shows, our portfolio PD is improving.

This is a key measure of credit risk at the individual transaction level. Timing of resolutions also impacts our arrears metric, as SME loans are not like mortgages.

They're all different. They take different times to resolve, which adds to lumpiness.

Notwithstanding this, we remain very comfortable with our long-run write-off assumption of 50 basis points of average GLA. On that, I'll now hand over to Andrew to go through the financials in more detail.

Thank you, Chris, and good morning, everyone. In the first half of FY '26, Judo delivered a strong financial result, with profit before tax of $86.5 million, up 26% on the prior half.

This was driven by continued above-system growth in the loan book, a stable net interest margin, and lower cost of risk charge. On a half-on-half basis, net profit after tax increased 32%, earnings per share rose 32%, and return on equity improved 140 basis points to 6.9%, demonstrating the strong operating leverage of our business.

Over the next few slides, I'll walk through each of the key drivers of financial performance in turn. Starting first with NIM.

This slide sets out the key drivers of net interest margin from June '25 to December '25, and overall, the outcomes were consistent with what we flagged at the FY '25 result. Running through the drivers starting with the green positive bars.

First, the treasury portfolio, which had a 7 basis point positive impact on NIM, largely due to the reinvestment of maturing low-yield fixed rate bonds. Next, other cost of funding.

This delivered a 1 basis point favorable impact due to mix and continued optimization of wholesale funding. As you can see from the chart, these benefits were partly offset by three factors.

First, equity, which had a 4 bips drag on NIM, as the impact of falling interest rates was partly offset by our investment term of capital policy in place. Second, deposit margins were unfavorable by 3 bips, with blended deposit costs increasing in first half '26 as the more expensive deposits that we wrote in the second half of '25 washed through the book.

Finally, lending margins had a 2 bips drag, reflecting lower front book margins in the final quarter of FY '25, as well as some changes in mix as we scaled warehouse lending, which is a lower margin but a higher ROE product. Moving now to our expectations for NIM in second half '26.

We are upgrading our second half '26 guidance for NIM from 3.1% to 3.15%. The more positive outlook for NIM is primarily a result of the improvement in the cost of new deposits over the half, which I'll address in the next slide.

Wholesale funding should also deliver us a modest benefit. Lending margins are expected to remain broadly stable, and we will balance lending margins against funding costs to deliver to the overall NIM result, especially in the current environment.

Finally, we anticipate a more neutral impact from treasury activities and equity over the remainder of the year. Overall, we will continue to manage NIM above 3%, which remains our at-scale target.

Next to deposits and deposit margins. We continue to grow our deposit franchise, supporting the ongoing momentum in our loan book.

The franchise continues to perform well, with retail rollover rates now increasing to above 70%. As I touched on earlier, the blended deposit margin was 92 bips in the first half, up from 87 bips in the prior period.

Now, this increase primarily reflects the flow-through impact of higher priced TDs that we originated in second half of '25, when heightened uncertainty around the cash rate outlook and the broader global macro conditions resulted in some significant volatility in the swap curve. In contrast, during the first half of '26, new TD margins declined sharply to 78 basis points, slightly below our through-the-cycle expected range.

This reduction was largely due to the stabilization of the swap curve, as greater certainty emerged around the direction of interest rates. In addition, during the half, we introduced new TD tenors and launched our first at-call savings product.

These enhancements have given us more strategic flexibility and improving pricing. As illustrated in the bottom chart, term deposit margins can be volatile, and as such, we continue to expect a through-the-cycle TD margin of 80 to 90 basis points.

Now let's turn to the overall funding stack. Over the half, we continue to strengthen and diversify our funding mix, while making further progress towards our at-scale funding target.

Deposits remain our lowest cost source of funding, and are critical in our ability to scale the loan book. Over the half, we achieved another $1 billion in deposit growth, taking the book to just shy of $11 billion, or 69% of total funding.

After 7 years of offering only term deposits to our customers, and following the transition to our new technology platform last year, we are now expanding our product suite to include at-call savings. The rollout of these is tracking to plan, with an intermediated savings account launched last October, and a direct online savings account launching soon.

These at-call products will provide greater flexibility in managing deposit flows across products and channels, while continuing to support our strong brand for competitive rates. Wholesale funding markets remain an important source of diversification and flexibility for us.

This includes warehouse funding, which we continue to optimize, as well as our full suite of wholesale debt and hybrid structures. Our track record as an issuer continues to strengthen, and we are seeing progressively improved pricing outcomes.

During the half, we issued a new Tier 2 instrument, which priced 120 basis points tighter than our previous Tier 2 transaction. Overall, we will continue to grow and optimize our funding stack, which remains a key lever in supporting our sustainable growth and improving economics.

Turning now to operating expenses. In the first half of '26, our cost to income ratio increased slightly by 60 basis points to 48.5%.

Importantly, this was down 890 basis points compared to PCP. Looking at the drivers, employee costs increased 16% half on half.

As discussed back in August, second half '25 was impacted by several volatile items, notably final incentive outcomes and payroll tax. A more meaningful comparison against first half '25 shows that employee costs in the most recent period were up a more modest 3%.

This increase reflects the continued recruitment to support lending growth, wage inflation, including superannuation, which was higher following the annual review cycle, and the normalization of incentive accruals and payroll tax. Non-employee expenses increased in total by 6% over the half, primarily driven by higher amortization from our technology investments and timing of some marketing and project activity.

Looking forward, we continue to expect full year FY '26 CTI to be below 50%, with an improvement in the second half versus the first half as operating leverage continues. While FTE will increase to support lending growth and the launch of our at-call deposits, we expect other operating expenses to remain broadly stable in dollar terms compared to the first half.

Turning now to asset quality. Impairment expense for first half '26 was $40.1 million, or 62 basis points of average GLAs, lower than the prior half.

This primarily reflects a slowdown in the rate of new impaired loans. At the end of the half, collective provision coverage was 89 basis points, down 6 bips.

This movement reflected a combination of factors, including strong lending growth and changing mix in the book, proactive management leading to customer exits and repayments, ongoing seasoning of the book, and continued improvement in the macro environment. New impaired loans were in line with our expectations, and were concentrated in the more vulnerable sectors where we carry an overlay, including discretionary retail, manufacturing, and construction.

During the half, we increased the overlay to reflect some continued challenges for manufacturing and construction and their associated sectors. In addition, we increased resources focused on identification and intervention of early-stage arrears.

Looking ahead, we expect economic conditions to be favorable through the remainder of the financial year, and these factors should continue to support resilience in credit performance going forward. Overall, we remain comfortable with our collective provision coverage and our total provision coverage, which was 1.43% of GLA.

Finally to capital. We continue to maintain strong capital ratios at both CET1 and total capital levels.

We closed the first half with a CET1 ratio of 12.6%. Growth was the primary contributor of CET1 consumption at 90 bips.

Pleasingly, organic capital generation improved in the first half, contributing 50 basis points of capital, supported by rising profitability. We expect this trend to continue as operating leverage builds over time.

Looking ahead, we have a range of proven initiatives available to support our growth strategy while maintaining capital strength. We have one existing public term securitization issue outstanding, completed in 2023.

Whilst this type of transaction remains an option, we're also exploring private structures, including loan sales. These options would allow us to optimize capital and balance sheet velocity to support our growth going forward.

Thanks again, folks, and I'll now hand back to Chris.

Thank you, Andrew. I'll start to wrap up with the slide that explains the key elements of our current strategy, which, as we've already spoken about, is optimizing the bank we've built.

For us, a consistent, simple strategy has been a key factor of our success. We are and will continue to be solely focused on the SME sector.

It is the most profitable sector in banking today. Our four strategic priorities have not changed.

First, enhance our core business. Second, grow our TAM.

Third, optimize our funding, capital, and costs. Then fourthly, create new avenues for growth.

As we have discussed, in the middle of last year, we completed the implementation of our core systems. Since then, our focus is banker productivity and the development of new, ROE-accretive products.

Andrew's already covered the progress we've made with the new deposit products, and in the coming slides, I will expand on other optimization work. Ultimately, as a bank, we are valued on our ROE.

Our focus now is to balance growth and returns in order to deliver our at-scale ROE in the low to mid-teens. Looking ahead, our focus is to unlock the next phase of growth by building on the foundations we've put in place.

We have multiple levers, but we are approaching them in a disciplined and targeted way, consistent with how we've always run the bank. Our core lending franchise remains our growth engine, supported by our relationship-led proposition and strong broker partnerships.

Our Broker Black Belt program, which was launched during the half, supports our top 50 commercial broking partners, and is delivering strong results, including a 30% increase in their pipeline. This gives us the confidence to progressively roll out the program to the next tier of brokers, which we're very excited about.

It will continue to differentiate us from other banks in a market where brokers control about 40% of business lending flow now. As discussed already, warehouse lending is now well established, providing an additional channel for growth and diversification.

There really is a gap in the market for smaller non-bank financial institutions to access funding below, say, $100 million that we're leveraging with limited competition. At the same time, scale is giving us increasing optionality on funding and capital.

New savings products, wholesale diversification, and balance sheet optimization all improve our flexibility and resilience. Importantly, operating leverage is not only about lending growth.

Productivity is also key. The investments we've made are enabling us to grow more efficiently without a material increase in costs.

This combination of disciplined growth, funding optionality, and productivity improvements is what underpins our confidence in continued ROE progression. Now, banker enablement and productivity is a personal passion of mine.

Our objective is simple: we're investing in our proposition of smarter, faster, stronger, giving our bankers more time and a sharper edge. As we've discussed over many slides this morning, now that we've built all of the new scalable technology, our focus is freeing up banker capacity.

Utilizing our existing capability in tech and data, AI, process reengineering, and people development, we are simplifying processes that currently consume banker time. For example, how our bankers process loan modifications, margin changes, annual reviews, and variations are all being made faster.

As a proof point, our gross originations per banker have increased from $2.6 million a month in the second half of '25 to $2.8 million per month in the first half of '26. Assets under management per banker has also increased half on half.

We already have the lowest ratio of customers per banker in the sector, and these initiatives will create even more capacity for bankers to stay close to their customers. We're also using our data platform to provide better customer insights, enabling bankers to be more proactive in managing risk and identifying opportunities.

While it remains early days, we see significant potential for AI to create capacity for both bankers and other parts of the business. Now, AI won't replace banker decision making, rather it strengthens the quality, speed, and consistency of the judgment they already apply.

This is a key driver of operating leverage. We can grow without a significant increase in cost, and that flows directly through to CTI and ROE.

Importantly, this is not a one-off initiative. It's an ongoing productivity program that compounds over time as scale increases.

Scale really is our best friend now. Now turning to the broader macro outlook, trading conditions for SMEs continues to be favorable.

The Australian economy is demonstrating solid momentum, underpinned by an improvement in private sector conditions and a strong rebound in consumer activity in the first half of FY '26. This improvement in trading conditions is flowing through to business confidence and activity, and this in turn has led to strong business credit demand, which has been consistently above long-run average for the past 2 years.

While economic growth remains constructive, it continues to be constrained by capacity shortfalls across the economy, in particular with skilled labor. This is an incentive for SMEs to invest in productivity-enhancing initiatives, including automation, technology, and operational efficiency, which is supporting ongoing demand for business lending.

We have a clear role to play in this productivity agenda, providing the capital that businesses require to grow. Now to guidance.

Starting with GLA, we're targeting a June '26 loan book of $14.4 to $14.7 billion. As already stated, this range has narrowed as we have greater confidence in the trajectory of our lending.

Growth will continue to be driven by investments in the regions, improvements in banker productivity, and further progress in our warehouse lending business. As always, we remain disciplined and continue to price for risk as we navigate a competitive lending environment.

Turning to margins, as Andrew has outlined, we're upgrading the second half NIM guidance to approximately 3.15%, primarily reflecting benefits from funding costs. For the full year, this supports a NIM outcome at the upper end of the previously guided range of 3.0% to 3.1%.

On costs, CTI will be lower in the second half, with operating leverage becoming more evident. In terms of credit, we continue to expect cost of risk to be in the range of 60 to 65 basis points, representing a modest improvement on FY '25.

Taking all this together, we remain comfortable with full year PBT guidance of $180 to $190 million, and this does imply a strong second half earnings outcome. By June '26, we expect to have made meaningful further progress on ROE.

In closing, the first half of FY '26 has delivered strong financial performance and continued strong execution against our key priorities. We've continued to execute consistently, with operating leverage emerging and profit growth of over 50% year on year.

I'm very excited about the growth opportunities ahead as we continue to strengthen our lending franchise and invest in banker enablement, broker relationships, and our CVP. We have a clear productivity agenda, which will give our bankers more time and enhance our specialist relationship-based proposition.

Alongside this, we're actively optimizing funding, capital, and costs through a number of levers. The strength of our executive team, the engagement of our people, the consistently high advocacy from customers continues to differentiate Judo.

Together, these factors are supporting an ongoing progress towards an ROE in the low to mid-teens, which will be the strongest of all banks in Australia. Thank you for your time this morning.

We now look forward to taking your questions.

Good morning, team. Matthew Wilson, Jarden.

Hopefully you can hear me okay.

Thanks, Matt. Yep.

Yep. CBA like to hold themselves out as the only rational player in the industry.

However, your comments that accompany slide 7 in relation to non-regrettable losses, attrition, and the drivers thereof clearly say that's otherwise. Could you add some more color to that experience that you're seeing out in the marketplace?

I'm not going to give specific examples, Matt, but of the Big Four, one bank is consistently there, one bank is never there at the moment, and two of the banks are inconsistent and they're using both the price and the risk lever to win business. Price was very prevalent as a lever 12 months ago,

and

what we're seeing now, actually, is the risk lever being used more, presumably as they've tried to protect their NIMs. The challenge with using price as a lever to win new business is that ultimately infects your existing customer base, and that's where the big drag on NIM comes from.

It's just not consistent, Matt. It's different in different states.

As I said in my presentation, business banking is a people business. Two of the banks in particular, as they're seeking to grow quite aggressively, are definitely, from our experience, using price and risk as a lever.

I'll give you an interesting stat, Matt, if I could, because, as you'd expect, I look at every single customer that refinances away from us to understand the underlying reason. In 2024, I'm going back over a year, of the customers that we lost to the major banks on credit grounds, where we didn't want to support it on credit grounds, there was public data available within 12 months of the refinance that showed 50% of them failed or closed.

Wow. Thank you for that.

A second question: if I dig into the appendix, slide 28, there's some useful credit quality metrics. When we look at the movement in 90 days past due and impaired, it looks like property operators were the key contributor to the delta in the six months.

That's 20% of your book; they went from 1.17% to 2.06%. Can you also add some more color to the nature of the loans there that are driving that change?

Oh,

look, it'll be obviously the mix will have changed. What drove the increase on the over 90s in particular was one customer, actually, or it was 75%,

3/4

of it was one customer. They're operating actually in the childcare sector.

It was actually an established operator. It's a new greenfield site.

It hasn't come on stream as quickly as they would have liked, as we would have liked. We're still supporting and working with them.

That's why it's in arrears. We're not ready to restructure it, and we're well secured.

Look, every one of these has got a story behind them. As I said, we are plagued by the law of small numbers.

I know I can't use that script for much longer, but it's still, the denominator is still only $13.4 billion,

and

we have lumpiness in that number, but it's not causing me any underlying concern at all.

No worries. Thank you.

That makes sense. Cheers.

Oh, good morning, Chris and Andrew, and thanks for taking my questions. My first question is just on deposit margins.

Looking on slide 12, it shows the new TD margin was 78 bps, but the blended margin was 92 bps, which was up. It appears that blended margin is going to be washing through the book over the next 8 months or so, whereas the front book margin has been mostly at or below that 78 bps.

Can you just reconcile those two numbers and what we should expect over the next 4 months as that averages in?

You cut out a little bit, Tom, but I think the question, the gist of it, was around I guess what we've seen with blended, movements in blended and movements in the front book deposit margin, which I'm happy to talk to. You'll recall back April, May, in last year that we did see deposit costs spike, really off the back of significant volatility in that swap curve.

That cohort that we wrote in that half has started to now come through in terms of that kind of blended margin that we saw in first half '26. That's really why you see the green line in that chart kind of tick up.

A reminder that it takes about 8 months on average for those deposit costs to kind of wash through the book, given the longer duration in our TD book, perhaps, versus system. What you've now seen, I guess, is from a front book perspective, is we have seen a much more, as I called out in the speech, a much more stable swap curve, and so that volatility has kind of come out in terms of what we've been originating on the front book.

Those front book deposit costs were 78 basis points in the half. That hasn't washed through in terms of the blended margin, but as you think forward into the second half of '26, that's really the key driver of why we're calling out the NIM upgrade.

It's really driven by those deposit costs kind of coming through. There's always a mix of things there.

We've got a mix of tenors, there's different spreads across there. We've been pricing quite dynamically, and much more dynamically now with our new tenors across the whole spread.

Underpinning the second half '26 NIM guidance and that upgrade to 3.15%, that's really driven by what we're seeing in the front book deposits and expecting that kind of to start to wash through in the second half.

Just to build on that, we are getting a significant benefit from the new technology that we've deployed as our core for deposits. It gives us a lot more flexibility in terms of how to manage tenors and therefore bring a better science, if you like, in terms of how to optimize the returns on our TD book.

We have a lot more levers at our disposal now than we did, say, 6 months ago.

Great. Thanks, sir.

Just a second question on capital. You say on the capital slide you don't need additional equity to support your loan growth, but you're entertaining alternative capital-efficient options.

I understand that there's demand for your assets in terms of loan sales, but given they would be revenue dilutive to do that, can you just talk about why you'd be entertaining some of those structures, given it probably hurts the scale and metrics and the path to metrics at scale?

Fundamentally, it'll come down to optimizing the ROE. We don't know at this stage the economics of a loan sale, obviously we understand the economics of a capital relief term securitization, but it'll just come down to maximizing ROE.

Also, we're keen to give ourselves new levers. We are a bank that's maturing rapidly, and the more levers that we have around how to optimize funding and capital, the better.

Loan sale is a lever that we haven't currently got, and so building that into our arsenal of how we manage capital and funding is an important lever to have, but I'll let you build on it.

It's adding to that, Tom. For us, it's about having the tools in the toolkit, and we've always talked about that across our funding and capital stack.

We want to have all of these tools in the toolkit. We've done a capital relief term securitization, that is an option for us.

It's probably got more attractive than when we did that in 2023. Loan sales is another option for us, and we're kind of considering all of that.

Primarily for us, this is around the strong growth that we're seeing in terms of the lending book and how we can kind of best support that growth in a capital-efficient and an ROE-efficient way, as Chris said. This is about having optionality and really kind of maximizing the growth in the business against the ROE that we're building towards.

That's very clear. Thank you.

Thank you.

Thanks, Tom.

Thanks, and good morning. Just two questions in relation to your guidance.

Firstly, you've upgraded your NIM guidance in the second half. Can you just perhaps help us to understand how reliant that is on new deposit spreads remaining below your long-run target range of 80 to 90 basis points over the half, or have you actually built a bit of fat into that and do assume some normalization of those spreads over the course of 2H?

I'll take that, Andy. Thanks for the question.

We've certainly seen deposit costs on the front book be more favorable, and a lot of people are getting excited about what they've seen in the last month or so pre the rate rise. We've seen that number moves around a little bit in terms of what we're seeing on a month-by-month basis.

As we think about the second half, we're assuming that there is a little bit of normalization in that front book deposit costs. We've seen some repricing already from some of the smaller players off the back of the RBA rate rise, and so, as I said in my comments, we're still happy with that 80 to 90 basis point range.

Depending on the dynamics, we're probably going to be towards the bottom of that range as it relates to the second half, but underpinning the NIM upgrade to 3.15% is really the wash-through of the front book that we've already written in this half just gone, washing through the book. These things take, as I said earlier, 8 months to wash through.

We're really looking at what we've already written, what does that mean when that kind of washes through, as opposed to needing to see certain conditions in the second half to underpin that. A lot of confidence, I think, in that NIM figure based on what we've already written in the deposit book today.

That's really helpful. Thank you.

Then just a second one: obviously, you couple that NIM guidance upgrade with a tightening, I guess, at the volume range, which is a net upgrade. It would appear as if the revenue outlook that you're talking to in the second half is better than what you had been budgeting at the beginning of the year.

Just given that the PBT range remains unchanged, and I recognize that it is a 5-ish percent range, can you just talk to how you're thinking about the need to reinvest the better revenues back into the business as opposed to letting it fall through to the bottom line? I think that's particularly relevant, just given the presentation does highlight the operating leverage that you think exists in the business.

Yeah. No, that's a great question, Andy.

Firstly, lending for us, net lending growth for us, does tend to be a little bit back-ended. I think you need to think about the timing, I guess, of that that GLA, how it flows through, and and kind of and and therefore the question of kind of that revenue piece.

As as we've always said, January and February, pretty quiet months for us. We're not kind of seeing It's not a straight line to that to that to that GLA.

It does tend to be a little bit back-ended, especially after the summer period, where we see some pretty, we we don't see a lot of movement in the book until things kind of really start to get going in the in the final quarter. It does tend to be back-ended, and so that, you need to take that into consideration in terms of in terms of that revenue piece.

Yes, we are though investing in in in productivity and in growth with our bankers, and and whilst, we we've we will deliver a better second half CTI than we see in the first half, a little bit of that extra revenue will be will be consumed by, by by costs. For us really, this is, with that GLA upgrade and with that NIM upgrade, this is about increased confidence, I think, in in what we're delivering in the second half, and, we're very comfortable with that with that with that range in terms of profit.

There are other things that will impact that too, your view on rates will probably impact, where you sit in that range as well. Revenue a little bit back-ended and increased confidence with those with those upgrades in terms of that profit profit range.

Thanks, appreciate the color. Helpful.

Thanks, Andy.

Morning, guys. Hopefully you can hear me, and congrats on a great set of results.

I just wanted to touch on the lending book. Obviously, a lot's been said about it already this morning, but just trying to reconcile some of the growth that you've actually seen in terms of GLAs and just reconcile it back into the productivity of the relationship bankers themselves.

That's the first one. Then tied to this is really just around the client numbers that you actually show.

Obviously, the book's growing a lot quicker than what your actual customer numbers are, maybe just get a little bit more color on that, that would be helpful.

Absolutely, John. I'll take that.

You're absolutely right, the average loan size is increasing slightly. It's still just a touch below $3 million, but it has increased.

That's largely as a result of the fact that as we've expanded into the regions, the ticket size of lending in agriculture, I talked about that being up 23% in the half, they're generally a little bit higher in terms of average size. Also our warehousing business, as you would expect, does increase the average as well.

Yes, in terms of the average loan size, that has gone up. The productivity of our bankers has gone up as well as a result of a lot of the initiatives that I talked about in the presentation.

The combination of both of those means that our gross origination number is much higher. I think, as I said, in December, gross originations were the highest we've ever had in the history of the company.

We always sculpt to a net growth. If the attrition hadn't been as high, we would have probably pulled down the gross originations a little bit, and that may have manifested itself in a higher improvement on margin, because ultimately, we sculpt net growth to capital.

I've been asked time and time again in the past, if the environment gave you the opportunity to take more growth, would you take it? No, we will optimize returns as we sculpt to the capital position.

Thanks, Chris. Maybe just on my second question, just around the funding stack.

I think the average balance sheet that you provide is very interesting. The first time that we've seen at-call savings products coming into the funding stack.

It's obviously only at $9 million, it's a small number now, but you can actually get a sense for what that actual cost differential is just relative to your term deposits and your intermediated term deposits. Maybe you could just give a little bit of color on growth that you are seeing in the savings products and how you expect the mix of this to probably shape, I guess, certainly more over the course of 207?

Would be helpful.

Great. Thanks, John.

We closed the half with about $50 million in the intermediated savings account. That's the first of these two products that we're launching.

It's launched not direct, it's launched through one of our partners, and that's been helpful for us just in terms of managing flow and testing it and establishing it. We're probably doing about $20, $25 million net growth now in that, so that's kind of sitting at around kind of $75 mil at the end of January.

That's kind slowly building, and we'll continue to chip away there.

Just to be clear, that product is a very simple pricing proposition. It's just a price.

There's no kind of tiers or bonuses because it's offered through an intermediary. That is a little bit cheaper than what we've been seeing with our kind of through-the-cycle TD cost assumption.

That's not really the main game for us. The main game for us is the direct online savings account, which we're launching very soon, and we're really looking forward to bringing that to market to our customers.

That will be a product that we expect to take more flow in, that direct product. Very similar strategy, very similar approach that we took to our TDs when we launched TDs almost 7 years ago now, where we started in intermediary, we worked with our partners, especially as being new in that at-call space, and then we moved into direct.

Over time, as you can see with our TD book, we've taken a lot more and continued to take a lot more in that direct. That's the main game for us, but the intermediated account is a good start and again gives us a little bit more flexibility.

We'd like to add more partners to that over time, but we've just got one partner that we've got there for the moment, with the main game really being this direct online product that we're launching soon.

Great, thanks very much, Andrew.

Good morning, team. Just a question on the operating leverage.

I saw you've added another 10 bankers since June. As you look forward, and you've also indicated there's going to be investment in roles supporting some of this lending growth and deposits, how are you going to balance adding bankers here, or is there much more productivity to be realized through the existing force?

I think it's a bit of both, Brendan. We've always said that we're comfortable recruiting no more than sort of two bankers per month, we'd like to think about sort of growing the workforce by about 20 bankers per year.

That's largely on cultural grounds as well. We don't want to onboard too many too quickly, so that we can make sure that we embed them properly into the organization's culture and its risk appetite.

We're sort of close to the 32 locations I talked about earlier, as I said, we've got three other locations we're targeting at the moment. We won't go there till we can find the talent, whether we recruit those in the next 6 months or not will largely be about the talent.

We're really starting to build out the other regions now. The ones where we've already opened, as you can see, we've got huge growth in our regional and agri

business.

There's no shortage of opportunity for us to keep adding more bankers to those regions as we're getting established with our brand and our CVP and with the broker network there, etc. I think we'll always be recruiting bankers for the foreseeable future because we're 2% market share, and we've got a huge opportunity to keep expanding.

It won't be new locations, though, beyond the three that I've just talked about. Then on the productivity benefits, first and foremost, we want that to be invested into the relationships that our bankers have with their customers, better insights, spending more time with them, and so there will obviously be a trade-off whether we need the amount of bankers to manage the $20 billion book that was part of the original thesis.

We always said 200 bankers for $20 billion, I'm sure 200 bankers with today's technology, the tools that we're bringing to them, and an increasing average loan size, I would imagine that that would have increased significantly now. It is going to be a bit of both.

Thank you. Just a second question on your credit provisioning.

We're seeing a continued fall in the underlying collective provisioning despite quite strong loan growth. Where does sort of the board management see that provisioning coverage in terms of a minimum level?

It just continues to fall half by half. Is there going to be a point where you kind of hit a minimum and then it will need to grow with lending growth?

It's a great question. My personal view is I probably wouldn't want to see it go below sort of 80 basis points, personally.

At the moment, it's at 89. It's topped up because we have a higher specific provision.

Our Stage 2s are particularly low at the moment. Our origination PD has been improving, which has played out in the coverage as well.

Very, very happy with its level of coverage at 89 basis points and total coverage at 144, but I certainly, with all my experience, and I've been a chief risk officer three times in my career as well, I probably wouldn't be comfortable seeing it fall below 80.

Thank you.

Thank you. Good morning, Chris and Andrew.

Just following up on asset quality, if we put the two charts together on slide 8, it seems like the average customer is getting better, but the size of the tail is increasing. Is that a fair way to look at it?

When do you actually expect to start to see the tail turn, improve meaningfully, especially given the broader SME conditions do appear to be reasonable or getting a bit better at the moment?

You're absolutely right. All of our lead indicators are positive.

Our close monitoring files, the ones that don't show up in the arrears metrics, they've improved month

on month

for 6 months in a row now. Our impaired to GLA is down 7 basis points in the half, which is the first reduction we've seen since June '22.

The lead indicators are positive, and as I said, our portfolio PD is improving, and that's also matched by our origination PD as well. We don't want to say it's peaked, because we are plagued by the law of small numbers still.

It is lumpy. Certainly, I would hope to start to see it on a firm downward trajectory.

Chris, is that still the case including another potential rate hike? How resilient do you think SMEs are to rate hikes?

I don't think that would impact credit quality at all. When we originate a customer, we stress test to another 200 basis points on current rates.

We know that they can service at 200 basis points higher than they are now. I think that's not something that concerns me at all.

Obviously, we're 2% of the market share. We know our customers intimately.

We originate with one eye on what's going to happen in terms of the rate environment. We've backed the best operators that have proven that they have the experience to operate in different parts of the economic cycle.

Two more rate increases certainly wouldn't be a factor for us to be concerned about our book.

Thank you. Just a second question on term deposits: so, haven't done the math, but given that the mix shift that the big banks are reporting around their deposit portfolios, would seem like the term deposit market at best is sort of not growing, with the savings pool or savings account pool being the main source of growth in the deposit system.

What are the implications for Judo, given that currently you're quite reliant on the term deposit market, notwithstanding the advent of the savings products?

Let me put that into context. The TD market, if history is of any guide, when interest rates start to increase, customers move back into TDs because they like the immediacy of a higher rate if you take, say, a one-year TD.

We saw obviously the move, as you said, into accounts when interest rates were falling, whether that occurs or not, time will tell, but it would suggest that that would be the case. Let's put the TD market into context.

It's a $1 trillion system, there's $3 trillion of deposit accounts, but $1 trillion of them are TDs. The average duration of a big bank TD is about 4 months, they turn over three times a year.

That's $3 trillion of flow, so that's $250 billion of flow every month. We have the highest rates in the rate comparison sites and we're less than 1% market share.

What's happening to the TD system is not a factor on how we think about growing our deposit book. I would expect the TD system to start increasing again, as I said, because generally it does when rates increase.

We've been pretty consistent in growing that deposit book half on half on half by about a billion dollars net growth. Yes, the system can move around, but we're such a small part, and there's a customer there that wants a great rate, and that's our competitive advantage.

We're not so concerned by that, Andy, and certainly as we move into a rising rate cycle, we tend to see more of those customers looking at that certainty of TDs, as Chris said.

Makes sense. Thanks.

Hi, guys. Thanks for taking my question.

First question's on your term deposits. You noted in one of your charts that your rollover rates for your term deposits have sort of continued to improve over the years.

Just curious if that's driven mostly by Judo being leading on price in the market or is that partially driven by brand awareness, and especially if it's the latter, do you think this leads to any improvements on pricing over the longer term?

It's a great question.

Should

I take it?

You can take it if you want.

Look, the thing about rollover rates is you have to be consistent. You can't be schizophrenic.

You can't be high in the rate comparison sites one day and then low the next day. You've got to be consistent.

Once you've got a loyal customer base, we've got over 50,000 deposit customers, and as you said, our brand is strong now. When I wear my Judo T-shirt around town, so many customers stop me because they're deposit customers to talk about the bank.

We've got a very, very strong brand there now. The rollover rates, you're absolutely right, if you've got a high brand and high rollover rates because you've consistently in the rate comparison sites at the top end, People will continue to roll with you even if you're number two or number three or number four.

Because even in this digital world, the process of moving to another customer and doing the KYC yourself all over again and the digital onboarding, it's still quite time consuming. Customers like the fact that if they can bank with a bank that has a good rate, and they know that at rollover it's going to stay a good rate, then you get rollover rates in the high 70s.

As I was at NAB for many, many years in the retail business and we know exactly how customer behavior works on deposits.

Thanks. Sorry, just a follow-up on that.

How do you think that plays into pricing over time?

It should improve pricing over time.

We've seen that, Jason. We used to have to always be at the top of the league table, if someone priced up, we had to price above them, because we didn't have a brand.

If I look back, 6-odd years ago when we really were still establishing ourselves in the market, it hasn't been the case actually, probably for a little while now, where we'll be consistently good, we'll be up there, and we're a brand that I think is more recognized now up the top of those league tables. The credit union that comes in that not a lot of people have heard of that comes at the top of the price table, we don't have to chase that in the way that we probably used to, given the brand recognition that we've built.

I think you've already seen some of that benefit come through in terms of pricing, but every half that we get better brand loyalty, better rollover, we can just optimize that more. Part of the introduction for us of the new tenors is the ability to really leverage that at the margin a little bit more.

We'll have customers that will roll with a great rate in a 6-month or a 12-month, but there's always that cohort of customers that's a little bit more rate sensitive, and that's where we can perhaps have a slightly better rate in the 7-month or the 8-month, and still be able to keep that customer. This is the optimization that we're now able to do, because of the brand recognition, because of the investments we've made in the deposit platform with the technology platform, and the introduction of these tenors.

We've got more that we want to do there, but this has given us a lot more flexibility with the product.

Thanks. Just on to my second question.

It seems like funding costs have improved and you're speaking to better margins, and Judo's still looking to achieve that at scale by growing its book. With better margins, how do you think about the balance between the better funding costs and stronger volume growth, or is the focus for Judo heavily on returns?

Look, it's a balance. Yes, we're not going to trade off economics for growth, but with TD pricing being favorable, what we find is a lot of our competitors will start to pass that through in terms of the way they're pricing for credit.

We're not immune from that, but it's a balance. We know the net growth that we want to grow by.

We're not going to exceed that, we will let cheaper deposits flow through on to the NIM if we can do the same net growth. If we find that our competitors are passing it through, then we'll obviously have to do the same to remain competitive.

It's a balancing item. Ultimately, we manage the NIM.

Thanks, guys, and congrats on the results.

Thank you.

Hi, guys. We've been following you now for quite a few years, coming on 5 years now, and the metrics at scale that you put out just before IPO around that time talked about getting to 15 to 20 billion and getting that low to mid-teens ROE.

The one there was the approaching 30% cost to income ratio. When we think about it, it's probably taken a couple of years longer than originally anticipated to get to those metrics at scale.

The inflation environment's been a lot higher than you were probably anticipating. Getting to a 30% or the cost base in dollar terms is just going to be larger.

Do we need to think about it that the 30%, approaching 30%, is no longer realistic, just given the inflation environment and the revenue that you're going to have? Or is the metrics at scale probably somewhere around 20, 20 to 25 billion before you can get to that 30% cost to income ratio, given the inflation environment?

Jonathan, look, you're absolutely right. I think, as you said, with the amount of inflation and a pandemic and everything and all the other headwinds that we've had since the original thesis, the cost to income ratio approaching the low 30s is definitely anchored to the 20 billion now, not the 15 billion.

We've got the NIM there. What we haven't got yet is the other operating income starting to flow through.

We've talked a lot about at this stage of the build of the bank, I talked about it in my slides about other highly ROE-accretive products like trade finance, receivables finance, etc., where they are very high ROE products. You should be factoring some of those in to think about how we would get to the ROE.

You're absolutely right. I think at $20 billion loan book, I would be disappointed if we didn't have a cost to income ratio beginning with a three, getting down to the low 30s.

As you're probably right, John, it probably is a lending book slightly higher than $20 billion now, but at 20 billion, I would certainly hope that the cost to income ratio would begin with a three.

Thank you.

Good morning. Your progress on achieving your guidance metrics for this year suggests that you're managing the competitive environment well and you sort of managing the volume-margin trade-off.

I have a couple of questions that relate to the metrics in the medium term. The first is on capital, and the second is on ROE.

I'll start with the capital. Andrew, you say capital generation is positive, but slide 16 shows it's actually negative.

Growth in RWAs of 90 basis points outstripped the profit of 50 basis points, so that means the CET1 ratio is heading down. Can you tell us when you think the profit will cover the RWA growth so that your capital generation isn't negative?

In the meantime, if this current trend continues, when does the CET1 ratio become a constraint? Is it 12%?

Is it 11.5%? How should we think about capital becoming a constraint to your growth?

I'll cover the last bit, because it hasn't changed from the original thesis. Richard, we've always said that we think about capital optimized CET1 at about 11.5%.

To put that into context, the average of the regionals, I think, is 11.1%, and the average of the majors is 12.1%. The regionals are mortgage banks, largely ex-growth, we would want to hold more capital than them.

The large banks are advanced banks, they get huge benefit from their advanced accreditation, we think it's appropriate to be slightly lower than them. We've always pegged ourselves at the midpoint between the two.

That's how I think about capital being optimized at 11.5%. The other aspects of the question, Andrew?

We've obviously got capital still for growth there, Richard, based on those comments from Chris. We are getting more capital efficient, we're not shy about that.

We started post the IPO with the capital that we needed to get us to a self-sustaining place, and we're a lot closer to that, obviously, now, being a couple of years on our journey. We are still a consumer of capital, as but the benefit or the contribution from profit has increased, and I called that out.

It went from 40 basis points to 50 basis points over the half. That is an element that will continue to improve as we see the operating leverage.

It's why operating leverage is really important to us as we're kind of growing into these economics, but also as it relates to the capital journey. We are getting more closer to those capital levels, as you would expect.

We've sculpted the loan book and how we think about growth in our multiyear plans against that, and operating leverage is important for us because that has started and will continue to narrow that gap to a point where we get to self-sustaining. We're also looking, given the strong growth that we had in the first half, as I called out on capital kind of optimization, we've executed a term securitization before, that is very much an option for us.

The economics of that certainly better than when we did that in 2023, and loan sales is another option for us. It's another tool in the toolkit that we can use to manage capital around the edges.

The real thing for us is sculpting that lending growth and delivering on that operating leverage so that we're offsetting that lending growth with organic capital or profit contribution to the waterfall.

Thank you. My second question relates to returns.

I think it's sort of similar to the line of questioning from Jonathan Mott. You highlighted, Chris, at the start of the presentation that you're at your 10-year anniversary.

I think at the time of the IPO, most market participants thought you planned to get to your metrics at scale within this timeframe. Certainly, I think you had a sort of 10-year model that had you getting there.

Today, the ROE is only 7%. It is going up, but can you give us an idea on how long it's going to take you to get to a double-digit ROE?

Alternatively, again, similar to Motty's question, when do you get that $20 billion plus of loans and a cost to income ratio below 40%, approaching that 30%? How long do we have to wait?

You're right, Richard. The ROE trajectory for us has been pretty kind of stable.

If you wind back, absent this half, around that kind of 5%, 5.5%. This half it's moved up to just shy of 7%, and we've got earnings for the second half of this year that are kind of back-ended across the year.

We're going to see more operating leverage and therefore more progress on that ROE in the second half. We haven't moved that metric perhaps as fast as we had anticipated 10 years ago, partly because of pandemic and some of the cost inflation impacts that had, as along with everything else.

The pleasing thing for us now is that ROE is now moving, and it's moved quite significantly in a half, and we're on that journey. I think delivering on that is an important proof point for us, and the operating leverage is really now this part of the journey.

We're seeing great top-line growth that we're delivering through lending. We've got a NIM that's expanding with some positive tailwinds kind of under that.

We've upgraded obviously for second half of this year. We've got operating leverage in the cost base, and we've got other operating income that is still very much ahead of us.

All of those things will really support that ROE trajectory going forward, and we remain really confident in that. The building blocks of the business very much there in terms of delivering on that economic model.

Double-digit, 10% ROE, Richard, it should be an FY '27

story in some point. It certainly should be there by the exit of FY '27, but at some point during FY '27.

The trajectory that we've got, the momentum that we've got, operating leverage is our best friend. We're not paying a dividend, it will have that capital therefore to fund the growth of the loan book.

We're knocking on the door of double-digit ROE now.

It sounds like from the comments you've both made that the improvement in ROE you're seeing now is an indicator of the momentum you have in the business.

Yes. Absolutely.

Yeah. Thank you.

Hi, Chris and Andrew. Thanks for your presentations.

Just two or three for me, if you don't mind. First up on the NIM, obviously you're a bit over 3% now, but previously you've talked about having a NIM composition of mid-4% for the lending margin, cost of funding about a percent, and 20 to 30 basis point drag from liquid, so that sort of implies 3.2%.

Is that number still achievable in your mind?

Yes, absolutely. That's what we're managing to.

Today, as you said, the forward pipeline of our lending is around about that 4.3%. The deposits are slightly below the thesis, and the drag of the liquids is there or thereabouts, hence we're giving guidance of 3.15% for the second half.

I think the warehouse business is I suppose just a little bit of a change on that original thesis of the 4.5% minus 1 minus 0.3%, because the warehouse business does have a margin that's slightly lower than the rest of the book, but it's highly accretive to ROE. That's a trade-off I'm prepared to take because the risk-weighted assets on our warehouse lending is below 50%.

That might drag that down slightly. We'll still absolutely protect the 3% NIM, but you'll see the benefit of that come through the ROE line.

I guess to I guess to add to that, Nathan, we've, we've obviously upgraded to 3.15%, not quite 3.2%, but and a lot of that driven by what we're seeing in in terms of funding costs. We've we've talked, in the past about also getting, some better benefits through tighter liquidity management.

Now, we're probably are where we are for the moment, but we are high when you look at us versus other banks on an MLH basis. So, that's something for us to to mature into over time.

It's not something we're kind of calling out in the in the near term. We've got some other things that we can do in terms of the treasury book, in terms of just the rollover of fixed rate bonds.

Now, a bit of that's happened, we're not expecting that to be a big contributor into second half, but there's, there's some other things there: continued optimization of warehouse and more deposits in the deposit stack, we're still growing deposits actually faster than the lending book on a net basis, we're eking out a little bit more deposits in the deposit part in the funding stack, and that that will give us a little bit more as well. Look, 3.15% is what we've guided to for second half.

We've had some really good momentum there. I think going forward, it's going to be much more much more incremental in terms of in terms of benefits, but, that's a that's a pretty good base level and certainly supports, those kind of long-term economics even at even at 3.15%.

Yep, that's great. My second question was something that you just referenced there.

Obviously a bit of a NIM kicker from the treasury side of things with the repricing in this period. You've said neutral for the second half.

Is there much left to go on that repricing? Could you give us an idea of how out of market it is and how much of a future NIM benefit it could be?

Look, there's a little bit to go. I think a lot of the benefits you've seen in treasury, which have been as much about managing tight liquidity levels as well as that repricing of the fixed rate portfolio or rollover of the fixed rate portfolio, a lot of that has kind of come through, which is why we're calling that out as being more neutral.

We've still got a little bit of that fixed rate portfolio to come off over the next kind of eight, 12 or 18 months, but it's pretty small, and it's also as the balance sheet gets bigger, that just has a bit of a less effect as well. I think with the tightness that we're kind of seeing in credit markets at the moment, we're not expecting to see huge material uplifts in the same way.

There's benefits there, they're positive from a NIM perspective, they're in our control, but they're not going to be as material kind of going forward, just as the overall balance sheet's grown and there's less of that to roll off.

Great. Thank you for that.

Then the third question is you called out that the first half '26 net deposit margin's 78 basis points, but can you just talk us through what actually happened in the second quarter and where that's actually sitting at the moment, just to give an indication of how it's rolling through into the second half?

Look, the last 2 months in terms of the front book deposit costs have been pretty favorable. You can all see that with the public data, and you can do the maths on it, and I'm sure you all have been.

They've been quite favorable, so that has been a little better, but that's a short-lived piece, I think, because we have seen a number of players already starting to reprice off the RBA rate rise and obviously the movements kind of that have happened with swap curves. It's bounced around.

It has been favorable. It's been favorable at the end of the first half just gone, but we have seen repricing already occur, we're not expecting that we're going to see deposit costs kind of prevail at these current low levels, and that's not what we're needing to assume for the guidance that we've put through, and it's not what we're seeing in terms of some of that repricing up that we've already seen in the market.

Great. Thank you.

Thank you for taking my questions. Can you just touch a little bit more on potential securitization or loan sale, and obviously understand the benefits on ROE and capital, but can you just talk about your ability to see more gross originations significantly higher than the 1.5 billion in the quarter by more increased utilization of bankers and brokers to really refill that hopper if you do do one of those transactions?

Absolutely. As I said in the presentation, we don't have an issue with origination.

We sort of constrain our origination to sculpt to the growth that we want, which is sculpted to the capital that we want. If we did do a loan sale, as an example, then we certainly wouldn't have any concerns that we wouldn't be able to replace that.

Now, we'd want to replace it in an orderly way so that we don't consume it too quickly and then therefore erode the benefits of doing the sale in the first place. We're 2% market share.

We have the highest NPS in the sector. We have a compelling CVP.

System credit growth is running at 9%, 10%. There's no reason at all why we shouldn't be able to grow at a higher rate if we chose to do so.

Nice. Thank you.

Just further to Richard's questions before and on the same vein, currently you're growing around $2 billion per year, and you said you don't need to do anything on this to achieve your targets. Can you continue to grow about $2 billion per year to get to organic capital generation so you don't need to do a transaction or raise capital?

As I said earlier, Ed, that net lending growth that we're kind of been targeting and delivering on, that's been carefully sculpted against the capital and the capital runway. We don't need to raise any common equity to be able to achieve that.

We will look at loan sale or securitization around the edges to kind of manage capital and as an ROE tool as well, really, but from a kind of a higher level, that capital journey against net lending has been kind of sculpted against our requirements, and hence our comments that we've consistently made around our CET1 that we raised in the IPO and what that enables us to do.

Thank you. Just one further one: you touched on before about trade finance and receivable finance.

Can you just give a little bit more color on that, where you are on the journey, and potential ramp-up there of that improving your non-interest income? Oh, well,

where we are on the journey really is this is the point in our journey where we said we would evaluate those types of products. We weren't going to do it till the technology replatforming had been complete.

The current loan facilities that we have they sort of satisfy 80% of the funding needs of SMEs, this really is icing on the cake for us. Trade finance is particularly attractive because it really consumes very little capital at all.

That's sort of a here and now for us, thinking about how we leverage the investments we've made in the technology to start thinking about bringing those products to our customers. I'm not saying that they're going to be part of our product lineup in the next 12 months, but they're certainly on the radar now.

All of our focus now is on banker productivity, thinking about how we optimize funding through the new products we're about to launch there, and how we optimize ROE by solving some of the lending needs of SMEs that we don't currently have a solution for.

Just with that, would you need to invest in the technology to get those capabilities or add those on? Oh,

look, whether we build or partner or buy is an open question for us.

Okay. That's great.

Thank you for your time.

Thank you very much for the opportunity to ask some questions. I had three.

If we go through to slide 7, you actually talk about non-regrettable losses within the loan portfolio. What I find disturbing is I can't think of a single bank that hasn't spoken to me about some non-regrettable losses, and also quite a few of them tell me that they're kind of losing them to private credit and Judo.

When we have a look at that, could you just give us a feeling as to these non-regrettable losses that you've had kind of going out, have you gone back and had a look at how you originated them in the first place and what were the characteristics of them?

I don't have a concern. As I said, Brian, I personally look at every single customer that refinances away from us to understand exactly that point: was this an issue with how we originated the loan?

They're all for different reasons. Some where maybe the customer has the risk profile has improved significantly, and it's now being aggressively sought after by a major bank because it slipstreams through their credit policies and their more algorithmic approach to approaching credit, but at a price that just does not make sense for us.

There are others where they're using risk levers to attract customers. We've seen a number recently where, from a risk perspective, it doesn't meet our criteria, or particularly for the price, we're very disciplined around pricing for risk.

I can assure you, I look at every single loan, and I'm not unhappy with the reasons that we're losing that particular customer. I'm unhappy in terms of what they all add up to in terms of the overall metric, in terms of particularly for the last quarter at 30%, but I don't have any concerns with our underlying origination.

Chris, would your loan loss charges been materially higher had you not been able to shed these bad loans?

As I said I think I can't remember, I think it was Matt the first question, when I go back and do some vintage analysis, the loans that we let go in 2024 to well, just let go to banks and private credit, as you referenced private credit, and that we didn't want to protect on credit grounds, 25% of them had a public notice that we could read in the papers or what have you that said those businesses within 12 months had either failed or had closed. Interestingly, of the ones we lost to the Big Four, 50% of them had a notice in the media that they had failed or closed.

Right. Chris, am I incorrect just going back to the fundamental question: if it had not been for this very hungry market where some players aren't really pricing for risk, your loan loss charge would have been higher?

Not necessarily, because they could have been fully secured. They were in our workout area, where we would have worked through with the customer.

All I'm saying is, and it's generally a combination of price and risk. I gave a good example last time.

We had a $60 million customer in the agri space. We'd actually taken it off private credit, where the risk profile had improved, but it was probably at the edge of our risk appetite.

We were charging 6% over swap for it. The customer 2 years later had not been performing in line with what we thought their projections showed.

We were starting to get concerned by it. Interestingly though, Brian, had $120 million worth of security, it was 50% loan-to-value, we were never going to lose any money on that deal.

It was refinanced to one of the Big Four at 2% over swap. Now we are not going to do that on any day of the week.

If we'd kept it, would we have lost money? No.

We are not going to take that sort of risk for that type of price.

Okay. Am I right in assuming there's been something similar happened in this half?

There's been another two that are the same dynamic?

There was another one which was largely a hangover from COVID. It was sort of industrial land in New South Wales.

Again, very well secured. It was a disputed sale which took some time for us to resolve, and that finally repaid Actually, the asset was sold, actually, on that one, it wasn't refinanced away, and that was a $40 million deal.

That's the $100 million I was referring to earlier. Those two customers represented $100 million of the runoff in December.

Chris, the next question is kind of related to this, but if you actually have a look at your ECL provisioning, even though the probability weightings to base case, upside, and downside, and severe look the same, the reality is that you're increasing the downside weighting, but reducing the severe downside. Then if I have a look at the actual ECL scenarios, you've reduced the upside from 55 to 53, the base case from 76 to 71, the downside from 109 to 102, and the severe downside from 142 to 137, which sees the severe and downside cover has gone down from 121 to 113.

It seems to me that is largely what is underwritten the loan loss charge that we see in the result. Can we just get some comfort on this, because some of your peers are actually increasing their downside and severe downside to avoid the risk out in the future?

Could we just get some comfort on that, please?

One of the one of the additions, I guess, to to to add to that, Brian, is what we've seen, and you can see it, I guess, in what we've what's come through in terms of the collective and the overall provision coverage, is that that that collective coverage has come down, and that's really a result, I guess, of of, of all of this as it relates to a P&L perspective. What we've had in the in the period is because of that higher higher attrition in the book, more of what we've got kind of coming through has been in that in that Stage 1.

I.e., it hasn't it hasn't it's been a much more recent assessment of credit, and so overall when you look at the, the ECL across the the different weighting scenarios, this is in Note Note 10 for those following along at home, you can see those numbers have come down, and that's really due to this this mix component of what's what's happened in the book, where we've had more attrition and we've had, more new new lending, I guess, in the book, and so you've got less as a proportion sitting in that kind of Stage 1, sorry, more more kind of sitting in Stage 1 and less sitting in Stage in Stage 2. The overall weightings that we've taken to those scenarios, just just to confirm, has not, has not kind of changed.

We've we've held that downside at 30% and the severe downside at 15% from a weighting perspective, but the ECL levels that those weighted scenarios deliver have decreased largely due to what's happened with that kind of mix in the book.

Okay. The next one that I had was just coming back to your guidance slide.

One of the problems I sense you might have You might disagree this is even a problem, but with your guidance for this year of $14.7 billion, but the metrics at scale figure starting at 15 to 20, we're now finding out today scale is probably closer to 20 than 15. I'm just wondering if we could add to that slide when you think you'll be paying a dividend, if at all, because it does seem, when we have a look at it today, we can see more reference to kind of artificial ways of creating capital, whether it's a loan sale or securitization, but I'd just be interested, when do we get so organically capital generative that you can hold your capital ratio steady at 11.5%, but also start to fund the dividend, and what would be that dividend?

It's it's a little it's a little early to be specific on the policy, Brian, but certainly when we get when we get to that that that crossover point in terms of the the ROE against our kind of level, we'll we'll have a decision to make around where we deploy that capital. Is that to continue to grow and grow, grow grow above system or or or is there an option to also see some of that deployed in terms of a dividend?

That'll depend on the opportunities that we that we see at the time and also the economics of the of the of the business and the ability to continue to eke out kind of higher returns, across the across the portfolio. We are building towards that point, and, as we were talking about earlier with Richard's questions, I think for for the first time now, we're actually have been able to kind of deliver a a material kind of move in that in that ROE, and this is this is the start of this multiyear operating leverage journey that we're on.

I suppose the only point is, though, is that the capital ratio is coming down quickly, and even if you have a look at the profit before tax you're guiding, it will continue to basically fall.

It's

just the mechanics of your profitability versus your growth. It is not unreasonable to conclude that when we come along to the next result, this guidance slide will have changed, that 15 billion will have been replaced with another number?

Exactly. That's right.

Oh,

look, we're not kind of changing the metrics at scale at this point, but there'll be an evolution at some point where we just talk about ROE, and

Yeah. That'll be the next evolution.

We're kind as you've noticed, we're pretty close to the bottom end of that GLA range. We've got the NIM now above 3%, and we can talk about where that'll land, but that metric is kind of cleared now.

We're demonstrating where we are in terms of the asset cycle, and the CTI is the one that's going to come last, but we want to be able to provide some clarity to the market in terms of that journey and that downwards journey, but there'll be a point where we just talk about ROE and the building blocks to that.

Could I push my luck with just one final question? Macquarie destroyed the at-call deposit market, destroyed the home lending market, very competitive pricing.

The other day at their operational briefing, they did flag that the next thing they're going to look at is the term deposit market. It kind of feels to me from your presentation, we all know TDs have gotten better, we can see it in every single result, but does that actually create a degree of risk for Judo, given that you've always priced your TDs kind of like the highest rate card in the market, and we can see perhaps a fairly severe disruptive force such as coming in that spot?

Does that create more of a risk for Judo than perhaps it does your peers?

It was interesting the comments from Macquarie, we obviously noted them. They used to be a bit of a competitor in the TD tables.

They haven't been for a while, they've been priced certainly away from the branchless bank segment, which we're in. Look, they're a good competitor, they're a great brand.

I think the difference for us is we're a challenger, and we are an SME bank, our asset yield is not kind of diluted by mortgage asset yields, and so our competitive advantage with that asset class has always been to pay a competitive rate. If you look at the branchless banks that we compete with, they're all mortgage banks.

Most banks are mortgage banks, and so we've always wanted to bring a competitive rate to the TD market and looking at that asset yield as a way for us to be able to do that. When you look long term across the branchless banks, it's historically been in that kind of 80 to or 80-odd basis point kind of range, and our planning assumption hasn't changed for years, has been that we'll be 80 to 90 basis points.

When you look at the majors, the regionals have historically been much lower, and Macquarie hasn't been really active in certainly in the segments and the customers that we look at of late.

The other point I'd make, Brian, on this is the average size of our TD is $100,000. These are generally retiree-type customers, and they generally have more than that available to invest.

It's just they spread it across ADIs because they're very aware of the $250,000 government guarantee. I think for us, as long as we have a rate that's up there, we continue to invest in our brand, we continue to invest in the digital experience, and we're still a less than 1% market share in terms of the TD market, it's not something that gives me too much concern at this stage.

Thank you very much. Thank you, I appreciate it.

Thanks, Brian. I think that's all the questions.

Look, thank you so much for joining us this morning. We always love talking about our company, hopefully today's results have demonstrated that we just continue to execute against our simple strategy.

We've reconfirmed our existing guidance for FY '26. Scale really is our best friend now, and the operating leverage is starting to come through.

We've enjoyed talking to you this morning, and wish you all the best for the rest of the day. Thank you.

Thank you.