Good morning, everyone. My name's David Hornery, and it's my pleasure to welcome you to Judo Bank's annual general meeting for the 2026 financial year. I would like to begin by acknowledging the traditional owners of the land on which we meet today and pay my respects to their elders past, present, and emerging. I would also like to acknowledge my fellow directors here today, Brad Cooper, Jennifer Douglas, Peter Hodgson, Malcolm McHutchison, Manda Trautwein, and David Stephen, together with our CEO and Managing Director, Chris Bayliss. We are also joined by our Company Secretary, Yien Hong, and representatives of our auditor, PricewaterhouseCoopers. I would also like to warmly welcome members of the Judo's executive leadership team, our employees, our customers, and shareholders who are joining us either in person or online. Now to today's formal proceedings.
To begin, I would like to provide some reflections on the past year and, if you will, the duality within it. On the one hand, we saw strong underlying growth in profit, driven by improvements in key financial and operating metrics of the company. On the other, we also saw a significant fall in our share price, post an update late in the financial year around our cost of risk. Let me speak plainly to the latter point and then come back to the first point. The increase in specific provisions late in the year was very disappointing, particularly for our shareholders, many of whom have supported Judo over a long period.
When the market delivers a message like the one post the update in June, it is important that the concerns being raised and the questions directly and impliedly being asked by the market are heard, unpacked, reflected on, and most importantly, that the organization responds in a thoughtful and measured way. As a part of that response in the weeks post the market update, the Judo team spent considerable time meeting with investors and analysts, listening carefully to the questions and concerns. We took that feedback on board and in the lead up to our annual results announcement in August, worked hard to put together a comprehensive set of additional disclosures that provide a much higher level of transparency into the performance, structure, and diversification of the book. However, we also recognize that there is more work to do to rebuild confidence.
We know this will take time and, importantly, consistent delivery. We will continue to carefully listen to feedback and take action to answer the questions that the market is asking. Let me then also reflect on the second point, the actual financial and operating performance of the company in FY 2026, because context here is also important. The company grew profit before tax by 34% in FY 2026. When we listed in 2021, we did so with a clear belief that Australian SMEs deserved a genuine alternative to the offering of the incumbent banks. We set out to unapologetically bring back the craft of relationship banking, to support and grow with our customers, and to do this through experienced bankers making faster decisions, using smarter judgment, and building stronger relationships with their customers.
It was a differentiated proposition then, and five years on, we believe that differentiation is stronger and more relevant than ever. In the years since our listing in 2021, our underlying profit before tax has grown progressively from AUD 16 million in FY 2022 to AUD 32 million in FY 2023, AUD 51 million in FY 2024, AUD 126 million in FY 2025, and to AUD 168 million in FY 2026. We now have almost 600 employees across 32 locations nationally and more than AUD 15 billion in lending to Australian SMEs.
We have an investment-grade credit rating, built a diversified funding platform, and continue to deliver industry-leading customer satisfaction, while we are only still 2% market share. As Chris will also take you through, in addition to the strong profit growth, our performance on other key financial indicators such as net interest margin, growth in lending, cost-to-income, and capital position were also strong.
These achievements are significant, and the board is proud of the business that has been built over the past decade. But returning to my first point, while we delivered solid progress against many of our financial and non-financial priorities this year, we recognize the impact the market update and the share price decline has had on our shareholders. The board, the executive team, and much of the broader Judo team are shareholders alongside you and share your disappointment with where we see it sitting today. Accountability for the market update and share price outcome started with our leadership team. With the CEO and executive key management personnel proposing that they receive no short-term incentives for FY 2026. The board fully supported that decision. Let me turn now to our customers. Australia's SMEs employ seven out of every 10 people in the private sector.
They're a cornerstone of our economy, and ultimately, they are why Judo exists. One of the great privileges of serving on the board is the opportunity to meet with customers across the country, including increasingly in regional and rural communities, where Judo continues to expand its presence. Through those conversations, we continue to hear about the challenges facing Australian businesses. Australian SMEs continue to operate in a challenging and uncertain environment. Higher interest rates and borrowing costs have weighed on business investment and cash flow, while weak productivity growth and broader policy uncertainty continue to constrain business confidence. Against this backdrop, some businesses are adopting a more cautious approach to investment and hiring decisions. But despite these headwinds, SMEs in Australia remain both dynamic and resilient, adapting to changing conditions and with many continuing to seek opportunities for growth while carefully balancing cash flow management, investment needs, and operating costs.
In times such as these, when I'm with our customers, one thing that comes through consistently and clearly is the value of deep banking relationships, where the experienced Judo banker understands their customer's business, is available, and equipped to support them through all stages of their growth. This is why Judo exists. Our purpose-built, relationship-centered proposition continues to address a major gap in the servicing of the Australian SME market. Supporting SMEs is critical not only for employment and thriving local communities, but also for lifting Australia's productivity and long-term economic growth. Again, I'll let Chris take you through some more of the detail, but it's worth calling out just a couple of the ways we continued to strengthen the foundations of the bank this year. Firstly, we continued to deepen and diversify our funding base.
We did that with the successful launch of two new savings product, high interest online savings accounts, that have had strong adoption by customers. We also launched a AUD 500 million term securitization transaction in June that was ultimately upsized to AUD 750 million at highly competitive pricing. We have also continued investing in technology and innovation. The successful completion of our core technology transformation places Judo in a strong position to scale efficiently in the years ahead. Building on those strong foundations, we are increasingly focused on how technology such as artificial intelligence can help our bankers spend more time with customers and strengthen organizational productivity and capability. The successful launch of Broker Black Belt is another example of the continued refinement of our operating model, deepening partnerships with our highest performing commercial brokers while explicitly aligning incentives to growth, net promoter score, and asset quality.
Very pleasingly, we are beginning to see the positive results of this program. Let me talk about our culture a bit. Our culture remains one of Judo's greatest strengths, and it is an important source of competitive advantage in the banking industry. From our earliest days, we have believed that creating a great experience for customers begins with creating a great environment for our people. The board spends considerable time on culture, leadership development, and ensuring we can attract and retain the industry's best talent. We continue to attract and retain high caliber bankers and industry specialists who share a commitment to customer outcomes and the entrepreneurial spirit that defines Judo. I am delighted that for the fourth consecutive year, Judo was recognized as an AFR BOSS Best Places to Work.
Recognition like this is important not because of the award itself, but because it reflects the strength of our culture, of the culture that people have worked so hard to build. On behalf of the board, I would like to sincerely thank the whole Judo team for everything they have done in delivering for our customers throughout the year. On sustainability, the board continued to focus on environmental, social, and governance considerations throughout FY 2026, and you will see the enhanced ESG reporting we have included in this year's annual report. These matters are important to our customers, investors, employees, and broader stakeholders, and they remain an integral part of responsible long-term value creation. We have also continued to strengthen our governance capability. During the year, we welcomed David Stephen to the board. David brings extensive banking risk and leadership experience from banks both in Australia and internationally.
His appointment further enhances the depth of banking industry expertise you have around the board table. As Judo continues to scale, ensuring we maintain the right mix of diversity, skills, and experience on the board remains an important opportunity. I would add that we are committed to improving the gender balance on the board as soon as practically possible. As we look ahead, it remains clear that the economic environment remains challenging, both for Australia and within that for the SME sector, and that the environment will continue to evolve. We also see competition within the industry remaining strong. We have built a differentiated specialist bank with a clear purpose, a strong culture, and deep customer relationships. We are proud to be the only challenger bank dedicated to servicing SMEs, as well as providing leading deposit rates for our savers.
Our conviction in the value and importance of true relationship-driven offering to Australia's SMEs remains unchanged. Our bank is demonstrating increasing scale and operating leverage, and importantly, that operating leverage is no longer a promise for someday in the future. The evidence is there in the underlying profits I referred to earlier on. We also understand we have work to do to build on that and further to go on our journey. So on behalf of the board, I would like to thank you, our customers, the Judo team, and you, our shareholders, for your continued support. I would like to now invite our CEO and Managing Director, Chris Bayliss, to provide his review of this year's performance and outlook. Chris?
Thank you, David, and good morning, everyone. Let me add my own welcome to the 2026 Judo AGM. It is a great privilege to provide an update to you today, our shareholders. A decade ago, we set out to build a bank that puts experienced bankers, sound judgment, and strong relationships back at the center of the Australian SME economy. Today, Judo is a profitable, nationally recognized bank supporting nearly 5,000 SME customers across 32 locations in Australia. I am incredibly proud of what we have achieved over the past decade and since our listing in 2021. We have built a business bank that matters to SME customers and the communities they support. SMEs are, of course, the heart of the Australian economy, and supporting their success remains our core purpose.
However, while we have made meaningful progress against many of our strategic objectives during FY 2026, the year, of course, was not without its challenges. Disappointingly, our FY 2026 result was impacted by an increase in provisions announced late in the financial year related to a small number of customer exposures. Following the provision increase, we undertook a number of detailed reviews of our portfolio, governance, and risk management processes. Those reviews reinforced our confidence in the underlying strength of the franchise whilst identifying opportunities to further enhance oversight and monitoring. We have also provided significant amounts of additional disclosure, providing transparency of our loan book. Importantly, these events do not alter our confidence in the overall quality of the portfolio or the strength of the Judo model.
We remain confident in our origination processes, underpinned by our 4Cs approach to credit assessment, and that we can continue to grow and achieve the economics of our business. Indeed, but for the provision top up, FY 2026 was a strong year as we continued to execute against our strategy and made meaningful progress across our key priorities. We grew our lending franchise, strengthened our funding platform, improved margins, delivered operating leverage, and increased profitability. We achieved another year of strong balance sheet growth, with the loan book reaching AUD 14.7 billion and customer deposits exceeding AUD 12 billion. We continue to grow our lending franchise whilst also maintaining our sector-leading NPS scores and employee engagement scores. We also made significant progress in diversifying and strengthening our funding platform.
During the year, of course, we launched a new at-call savings product, further expanded our deposit franchise, and successfully completed a term securitization transaction, enhancing both funding diversity and balance sheet resilience. We delivered strong operating leverage with our cost-to-income ratio now improving to 45%, the lowest in the sector. This demonstrates the scalability of the Judo model and provides confidence that the future operating leverage can be achieved as we continue to grow. Return on equity also improved during the year, reflecting the benefits of the increased scale, improved operating leverage, and the continued franchise growth. Our focus for this year continues to be the execution of our key strategic priorities whilst being eyes wide open to the uncertain outlook for the economy and the impact that this is having on SMEs.
In this environment, our role as a relationship bank becomes increasingly important, and we remain focused on supporting our customers through it. As a management team, our focus is on maintaining a disciplined approach to our growth, our portfolio quality, and risk management. Lending activity was solid during this first quarter, with GLAs now almost AUD 15.1 billion at the end of September, with robust originations and improving attrition. Our pipeline of AAA loans was AUD 1.9 billion in September, with margins in the mid-fours. We normally see a slight drop in the pipeline this time of year, but over and above normal seasonality, we are observing some caution from SMEs due to the economy, interest rate rises, and budget changes. But we anticipated this, and it was a factor in our more conservative growth guidance for FY 2027.
Net interest margin performance in the first quarter was consistent with our full year guidance, and lending margins were in line with expectations. Blended margins were 4.1% in the first quarter, reflecting portfolio mix and competitive dynamics, and the front book margin remained stable at 4.2%. On the funding side of the balance sheet, deposits increased to AUD 12.5 billion in September. The blended deposit margins in Q1 were slightly better than expected, which offset the slightly lower lending margins. We grew both our term deposit and our savings account balances over the quarter, and we actively managed pricing and origination across both channels. Operating expenses also continue to be very well managed with our cost-to-income ratio in line with our expectations.
In terms of asset quality, some of our portfolio indicators have reflected the softer economic environment, including our 90 days past due and impaired loans, which increased to 3.16% at the end of September. Importantly, however, this remains below the through the cycle assumption in our original thesis. Given the current operating environment, a significant amount of management focus is on disciplined portfolio management and proactive customer engagement. Our relationship-based model means we are well-positioned to identify customers that are facing challenges and help them. Whilst asset quality remains an important area of close management focus, our broader first quarter performance has been consistent with our expectations. Q1 lending growth, funding margins, and operating expenses have tracked broadly in line with the assumptions underpinning the FY 2027 outlook. We remain comfortable with our guidance and will continue to monitor our portfolio very closely.
Judo also remains very well capitalized with a CET1 ratio of 12% at the end of September. This is at the upper end of our management operating range of 11% - 12% in normal operating conditions. This provides a sound, solid buffer against uncertainty, and longer term is a strong capital base that provides flexibility to support growth, absorb uncertainty, and over time, consider opportunities to enhance shareholder returns. Overall, we remain on track to achieve our FY 2027 profit guidance of profit before tax of AUD 210 million - AUD 220 million. As I conclude, FY 2026 was a year that reinforced the importance of discipline, accountability, and execution. Looking ahead, we remain confident in the long-term opportunity ahead of us. Our experience over the past decade has consistently demonstrated that SMEs value a banking partner that understands their businesses, values relationships, and is empowered to make timely decisions.
That, combined with the strength of our people, our customer franchise, our funding platform, and our balance sheet, gives us confidence in Judo's future. Our priorities remain clear. We will continue to grow our core SME lending franchise in a disciplined manner, further strengthen our funding platform, invest in productivity, and maintain our strong focus on portfolio quality, risk management, and capital discipline. The progress we continue to make in operating leverage, funding diversification, and scale is strengthening our path towards our long-term objective of achieving a low to mid-teens ROE.
We recognize that shareholders ultimately judge us on our ability to deliver sustainable earnings growth, attractive returns, and disciplined capital management, and our focus remains firmly on those outcomes. On behalf of the executive team, I thank our shareholders for your continued support, engagement, and confidence. I also thank our customers for the trust they place in us, and our people for their commitment to our shared purpose and vision. Thank you. I will now hand back to David, as Chair.
Thank you, Chris. Okay, we will now move to the items of business for this meeting. The notice of meeting was dispatched to all shareholders on the 18th of September, and I propose to take that as read. When you registered your attendance today, you would have been issued with either a yellow, blue, or red attendance card. Shareholders with a yellow or blue card are welcome to ask questions. Our visitors who were issued a red card are welcome at today's meeting, but a reminder they are not entitled to ask questions. If you think you have been issued with the incorrect card, please see the MUFG Corporate Markets staff at the registration desk out the front.
Shareholders with a yellow or blue card who wish to ask questions at today's meeting will need to show the Judo staff their card first and make their way over to the standing microphone, where they will be asked for their name. There will be an opportunity to ask questions at the end of each item of business, and again at the conclusion of all the voting items. Please note there is a limit of two questions per shareholder.
This meeting has been convened to consider the FY 2026 financial reports and the six resolutions as set out in the notice of meeting and explanatory materials. As explained in the notice of meeting and explanatory materials, there is a voting exclusion in relation to the vote on the remuneration report, the grant of performance rights and premium-priced options to the CEO and Managing Director, Chris Bayliss, and approval of leaving entitlements.
The resolutions put to the vote at the AGM will be decided by poll. Voting during this meeting is being conducted by our share registry, MUFG Corporate Markets, and the results of the poll for votes cast today will be calculated by our share registry and released to the ASX shortly after the meeting. For all those shareholders who are in attendance, we have already provided a proxy, sorry, who have already provided a proxy and do not wish to change their votes, there is no need to vote again.
Moving to item one. Item one of the notice of meeting is to receive and consider the reports of the directors and of the auditors, the income statement, balance sheet, and cash flow statement for the year ended 30th of June, 2026. There is no requirement for shareholders to approve these reports. Are there any questions or comments on this item from shareholders? Please.
Thank you. This is Mike, who would like to ask a question.
Ooh. Blow.
Thank you. Yes, good morning. Good morning, everyone. My name's Mike Muntisov. I'm from the Australian Shareholders Association. The ASA advocates for improved transparency and fairness for ordinary shareholders. As a reminder, Judo has nearly 10,000 shareholders. On that point of transparency, I'd like to acknowledge and welcome what Judo does with regard to the recordings of the results announcements and the Q&A, and posting that information on the website, which is very helpful, especially the Q&A part, which a lot of companies seem to omit. I had a couple of questions or comments.
Sure.
First of all, whether we like it or not, the ASX market favors dividend-paying companies. While I acknowledge that reinvesting profit is probably the most valuable use of capital for this company, even a modest payout ratio would yield a very attractive dividend for shareholders. It may actually help recovery of the share price, which has taken a bit of a tumble.
Yep.
A dividend, I think, also would send a signal of confidence to the market of sustainable growing profits, which you've actually achieved. It doesn't seem to be recognized.
Yeah.
My question is, what is the company's timeline for introducing dividend payments to shareholders?
Thank you for the question, Mike. It is a question that we get asked, unsurprisingly, quite regularly. I think this is something that the board thinks about on a very regular basis as part of our natural capital planning cycle. As you note, we think about capital management in regards to underpinning continued growth, and you heard Chris talk about the portfolio now being at AUD 15.1 billion and ensuring that we have strong forward-planned capital to underpin the growth that we expect in the year ahead. So it's about growth. It is about different kinds of capital management options, and there are several of those, dividends being one.
Then the other is making sure that we have a really strong, well-capitalized balance sheet as an indicator of our relative strength in the market, and that is able, therefore, to deal with normal economic cycles. I'm not going to put a timeline on it, Mike. What I would say is that it's something that the board thinks about very regularly. The capability of the people, the level of debate around all of these kind of options is a regular feature of board meetings and will continue to be so.
Okay, thank you. If I, if I could follow up with something, well, quite related. This is on the topic of franking credits.
Yep.
By my calculation, which could be a bit dodgy, but I think it's pretty close, Judo has accumulated sufficient franking credits to support fully franked dividends of more than AUD 0.30 per share in total, which is a hefty amount of franking credits sitting there without any dividends being paid. That's the dividends part. Given your success in growing profits, which has been very impressive, the franking credit balance will grow with those profits.
Yes.
These franking credits are particularly valuable to shareholders, but perhaps less so to the company directly. Can I ask what plans, including timing, does the company have to release the value of these franking credits to shareholders? Which could be beyond just dividends as well.
Yes.
Or it could be special dividends or whatever. There are probably a number of mechanisms available.
Yeah. You hit the nail on the head, Mike. There are multiple mechanisms. We are conscious of that franking credit balance that naturally accrues with growing profit. Ultimately, the use of those franking credits comes down to which of the capital management options we choose. You're right, there are a substantial amount of them there is inherent value as and when they are released and passed back. Really, it goes back to this core question about balancing the overall capital management options that we have, and that there are numerous with the return to shareholders, strong balance sheet, and underpinning growth.
Yes, Mike, your point's acknowledged that there is a strong franking credit balance. Again, as with dividends I'm not putting a timeline on the creation, the release of those, other than to say that it is something that the board talks about, thinks about, and debates on a very consistent basis as part of our broader capital planning activity.
Okay, thank you.
Yeah, thank you for your question.
Chair, there are no further questions.
Okay. Thank you. The next item of business concerns the re-election of Malcolm McHutchison as a Director of Judo. I'd like to invite Mal to say a few words.
Thank you, Chair, and good morning, everybody. My name is Mal McHutchison. I joined the board of Judo in February 2020, and today I stand in front of you standing for re-election. I spent more than 30 years across business, financial services, technology, and education. I am currently the Chief Executive of the Automic Group, also the Chairman of Allied Credit, and have also been lucky to advise several private equity firms around Australia. Previously, I was the Chief Executive of the Modern Star Group, Interactive, and was the Head of Asset Management at Macquarie Capital. These roles have given me broad experience in growing businesses, allocating capital, overseeing investments, and supporting management teams through periods of change. I've sought to bring that commercial perspective to Judo throughout my time on the board. Judo has made significant progress since I joined.
It's grown into a specialist bank with a loan book of AUD 14.7 billion and an increasingly important role in supporting Australian small and medium businesses. Since I joined, Judo has gone from loss-making to now being a highly profitable scale bank. At the same time, the asset quality update in June and the subsequent share price reaction were deeply disappointing for shareholders. I understand the importance of rebuilding confidence through transparency, accountability, and consistent delivery. These will remain central priorities for the board. I'd also like to address the composition of the board. I strongly support the need for greater gender diversity around the board table. Diverse boards benefit from a range of broader perspectives, experiences, and constructive challenge, ultimately making better decisions. As the Chair has said, maintaining the right mix of skills, diversity, and experience is an important priority as Judo continues to scale.
Improving gender diversity is a key part of that priority and will be an important consideration as the board continues its renewal and succession planning. I very much support that direction and recognize the importance of making meaningful progress. If re-elected, I'll continue to contribute my experience in strategy, investment, technology, people, and remuneration to help Judo deliver sustainable long-term value to all shareholders. I remain strongly committed to Judo's purpose, its customers, and the opportunity ahead of it. I would be honored to have your support. Thank you.
Thank you, Mal. I now move on to the resolution to be voted on by shareholders, being the re-election of Mal McHutchison. The board has considered Mal's experience and knowledge and recommends, with Mal abstaining, that shareholders vote in favor of this resolution. The votes cast prior to the meeting are now being displayed on the screen. According to the votes cast prior to the meeting, 85.72% voted in favor of the re-election of Mal McHutchison. Can I ask, are there any questions or comments from shareholders?
Chair, there are no questions.
Thank you. I now ask shareholders to complete their yellow voting card for this resolution. The next item of business concerns the election of David Stephen as a Director of Judo. I would like to invite David to say a few words. David?
Thank you, Chair, and good morning, everyone. My name is David Stephen. I joined the Judo board in March this year, and today I am standing for election for the first time. In the few minutes I have, I want to share some of my background, why I joined Judo's board, and what I will bring to it. I have spent my 40-year career in banking and financial services, much of it in risk-related roles. I was the Group Chief Risk Officer at three banks, Westpac and ANZ in Australia, and at the Royal Bank of Scotland in the U.K. Before that, I worked at Credit Suisse. Today, I am a Senior Advisor in Bain & Company's global financial institutions practice, and I am on the board of an Australian life insurer and Chair their Board Risk Committee. Why Judo, and why now? Judo turns 10 this year.
In a decade, it has built AUD 15 billion loan book and become a specialist bank that many Australian small and medium businesses rely on. This year, profit rose 34%. That represents impressive and meaningful progress. But this year has also tested the question every shareholder and a specialist lender asks: how does the loan book hold up when conditions turn? The asset quality update in June was disappointing. The reaction in the share price made clear how seriously shareholders took it. I take it just as seriously. It came three months after I joined, and it has sharpened my focus on exactly the areas where I believe I can contribute most. I have helped to manage banks through several material credit cycles, and I will bring that experience to three things. First, credit discipline as Judo grows and delivers on our strategy.
My experience is that strong growth and sound asset quality go hand in hand when risk appetite is clear, underwriting standards remain disciplined, and emerging risks are identified and addressed early. Second, balance sheet resilience. That means capital held with a margin for the unexpected and a funding base that keeps broadening. Third, risk culture. Judo's edge is the judgment of its relationship bankers. The job of a good risk framework is to sharpen that judgment, not smother it. Judo exists to back Australian businesses. It will continue to do that for the long term by being resilient through the cycle and acting in the long-term interests of you, the shareholders. That is the work that I want to help the board do on your behalf. I would be honored to have your support. Thank you.
Thank you, David. I now move on to the resolution to be voted on by the shareholders, being the election of David Stephen. The board has considered David's experience and knowledge, and recommends, with David abstaining, that shareholders vote in favor of this resolution. The votes cast prior to the meeting are now being displayed on the screen. According to the votes cast prior to the meeting, 97.91% voted in favor of the election of David Stephen. Are there any questions or comments from shareholders?
Chair, there are no questions.
Okay, thank you. I now ask shareholders to complete their yellow voting card for this resolution. The next item of business concerns approval to adopt the remuneration report set out in the directors' report for the year ended 30 June 2026. The vote on this resolution is advisory only and doesn't bind the directors or the company. However, any discussion on this resolution and the outcome of the vote will be taken into consideration by the board, people, culture, and remuneration committee when considering the future remuneration arrangements of the company.
There is a voting exclusion on this resolution. The board recommends that shareholders vote in favor of this resolution, and the votes cast prior to the meeting are now being displayed on the screen. According to the votes cast prior to the meeting, 99.29% voted in favor of the adoption of the remuneration report. Are there any questions or comments from shareholders in relation to this resolution? Mike?
Thank you. This is Mike, who would like to ask a question.
The ASA generally does not favor the use of options in remuneration schemes. In your scheme, you have a combination of performance rights and options, and I am wondering whether you could explain why you have chosen to use options in the scheme.
Sure. Thank you for the question, Mike. Can I frame it in how we are seeking to further align the remuneration of the Chief Executive to shareholders? We have both a fixed remuneration for the CEO and the rest of the leadership team in the company, but we also have a short-term incentive and a long-term incentive. In terms of thinking about the variable, as in the STI and the LTI, we took feedback from investors, a reasonable number of institutional investors, about their preferences for how they would like to see a level of alignment between the CEO's total package, and shareholders' interests.
As a function of that feedback and our own internal benchmarking and discussion, we felt that going to a 50/50 mix of options and performance rights was the right balance, including putting hurdles on them that relate to relative shareholder return or relative total shareholder return, and return on equity hurdles. So, it was in response to discussion with the market, feedback from the market, alignment with shareholders' interests, and what it does at a fundamental level is it takes the CEO's package from, we took a percentage out of STI, the short term, and put it into the LTI. We felt that that aligned more strongly with longer-term outcomes for shareholders linked to shareholder return and also to return on equity. So, it was moving more to LTI, linking to shareholders, and putting hurdles on it, we thought was actually, on balance, a good approach.
Yeah. I am not questioning that aspect. The LTI and expanding our LTI is fine. We fully expect, and you have got hurdles, and probably quite challenging hurdles to achieve relative shareholder return and various other parameters. The question really relates to why have you adopted options? You could have adopted 100% performance rights and had all the same criteria that you just talked about, but you have actually adopted 50% in options. The question is, why? It is a bit unusual, especially for a highly profitable company like this, why have you adopted options and not just 100% performance rights for the LTI?
We considered all of the alternatives, Mike. A big part of our contemplation, in addition to talking to investors, was benchmarking, right? Actually making sure that the total construction of the CEO and the KMPs packages are competitive on a national scale for the caliber of talent that we want and want to retain in the leadership of the company. A range of other comparative organizations have option structures that are not dissimilar. For us, what the benchmarking shows is how not only in terms of the volume and the total target remuneration, but the structure within that we felt we needed to be competitive to put the package together in totality.
Yes, we could have done it several different ways, including 100% performance rights. We felt both as a function of feedback from investors, and particularly around the allocation of hurdles, but also by dint of the benchmarking that we have done, that on balance, that was the right structure of package. Thank you. Any other questions?
Chair, there are no more questions.
Okay. Thank you. Thank you for your question, Mike . I now ask shareholders to complete their yellow voting card for this resolution. Okay, the next item of business concerns approval to grant performance rights to the CEO and Managing Director, Chris Bayliss. There is a voting exclusion on this resolution. The board, with Chris abstaining, recommends that shareholders vote in favor of this resolution. The votes cast prior to the meeting are now being displayed on the screen. According to the votes cast prior to the meeting, 97.05% voted in favor of the grant of performance rights to Chris Bayliss. Are there any questions or comments from shareholders in relation to this resolution?
Chair, there are no questions.
Thanks, Georgia. I now ask shareholders to complete the yellow voting card for this resolution. The next item of business concerns approval to grant premium-priced options to the CEO and Managing Director, Chris Bayliss. There is a voting exclusion on this resolution. The board, with Chris abstaining, recommends that shareholders vote in favor of the resolution. The votes cast prior to the meeting are now being displayed on the screen. According to the votes cast prior to the meeting, 97.05% voted in favor of the grant of premium-priced options to Chris Bayliss. Are there any questions or comments from shareholders in relation to this resolution?
Chair, there are no questions.
Thank you. I now ask shareholders to complete the yellow voting card for this resolution. The next item of business concerns approval to give benefits to executive key management personnel in connection with them ceasing to hold that office or employment with Judo. There is a voting exclusion on this resolution. The board recommends that shareholders vote in favor of the resolution. The votes cast prior to the meeting are now being displayed on the screen. According to the votes cast prior to the meeting, 99.64% voted in favor of the approval of leaving entitlements. Are there any questions or comments from shareholders in relation to this resolution?
Chair, there are no questions.
Thank you. I now ask shareholders to complete the yellow voting card for this resolution. Now that we've finalized the formal items of business, we'll address the questions that were submitted prior to the AGM and any questions from shareholders here in the room. We have received one pre-submitted question from shareholders prior to the AGM, and that was about the 40% loss in the share price. Let me respond to that, and then we'll go to questions in the room. As I said in my speech, we, the board, the bank, the leadership of the bank, are disappointed about the share price, and you heard that reflected in all of the speeches that you heard today. We have taken the market's questions seriously.
We've worked hard at responding, including providing a substantial amount of additional detail and transparency around the diversity, the construction, and the performance of the portfolio. That additional information was very well-received by the market. As I also pointed out, context here is really important. I outlined the growth in the profit, and you also heard as a function of my speech and Chris's, that a whole series of the other operating metrics of the company, the net interest margin, the overall cost of funds, the cost-to-income ratio, the net promoter score, and other, were also very strong. At the end of the day, we don't control the share price. The best way for us to allay the concerns or the questions that the market has is about continuing to deliver.
Continuing to deliver the operating leverage that we have seen emerge in recent years that I took you through at the opening of my speech. We feel that the accountability for the shareholder experience, notwithstanding the strength of growth in the company, that the accountability for the shareholder experience is there in FY 2026 by dint of the zeroing of the bonuses of Chris and the key management personnel. As I highlighted in my response to Mike, we have worked hard to further align the overall packaging of the CEO to longer term shareholder interests, even further than we believe they already were. Back to the first point, we have listened, we have reflected on the market's questions, we have responded, I think, with detail in a thoughtful and measured way. Context about the underlying performance of the business is very important context to consider when asking this question.
Okay, so let's then go to questions in the room. That was the only question that was submitted prior to the meeting today. Can I open it up to questions from shareholders in the room? Just reminding you, if you would like to ask a question, please make your way over to the standing microphone with your yellow or blue shareholder card. Georgia will ask you for your name.
Chair, there are no further questions from the room.
Okay. I appreciate the questions. It is a good opportunity to have that conversation, and including the pre-submitted question. Thank you. Thank you, everybody. That concludes the business of the meeting. I now declare the meeting closed, and thank you for your attendance here today and for your support. If you have a yellow voting card, please see an MUFG Corporate Markets representative and place it in the box. We would appreciate you finalizing your vote in the next five minutes or so. For those in the room today, we would welcome you to stay and join us for refreshments. Thank you, and look forward to seeing those in the room over a cup of tea. Cheers.