Since it launched in 2018, business lender Judo Bank has traded heavily on the promise that it operates on a relationship model, employing experienced bankers who get to know the customers and their businesses, at a time when other lenders are promoting their data-driven automatic decisioning. But does the claim stand up?

It was a surprise to discover from the bank’s prospectus for its recent initial public offering that only 27 per cent of Judo’s loans are originated through the bank’s direct channel. The others come through broker applications.

Judo Bank chief executive Joseph Healy said the heavy reliance on brokers and the relationship model are not incompatible.

Healy said: “We meet all customers, including when the origination comes through brokers. We don’t just take the file and process it.

“We meet the customer to see whether there is a basis for a relationship. If you look at our net promoter score, which is market leading at +85, there is clear evidence that our focus is on the customer.

“And we are selective about the brokers we work with. There are a lot of ex-bankers in the commercial finance broking market. They understand the SME market and they are the people we work with.”

Since its launch, Judo has originated more than A$4.1 billion of loans to SMEs. The loan book grew 97 per cent to $3.5 billion in the year to June.

Part of Judo’s business plan is to increase origination through its direct channel to 50 per cent. Healy said the strategy for achieving this goal included hiring more bankers and increasing its marketing spend.

Currently, Judo has 91 relationship bankers (with 21 SME customers per banker) and 32 relationship analysts. It works with 835 accredited brokers.

“We will add a couple of bankers a month. When you hire bankers they come with their own networks and direct sales will grow from that,” Healy said.

“We have not done a lot of marketing to date but we are going to ramp that up.”

Another curious feature of the bank is its funding mix. Judo’s funding comes from a mix of deposits ($2.5 billion at June 30), warehouse facilities and $2.9 billion from the Term Finding Facility. It views deposits as its core funding and is aiming for them to make up 70 to 75 per cent of total asset funding.

Deposit funding is entirely term deposits. At a time when other deposit takers have cut their TD rates and encouraged customers to switch into low-rate at-call accounts, Judo is raising TD rates.

Last month, it increased rates for three, six, nine and 12 months. Its three, six and nine-month rates are the highest in the market and its 12-month rate is the second highest for that term. It is also the rate leader for two years, three years, four years and five years.

Healy said: “We did not want to be exposed to short-dated funding, our view is that a young bank should not face the risk of having liquidity issues.

“So we have been prepared to pay a little more to ensure