Judo Bank closed the retail offer for its initial public offering on Tuesday and is on track to list on the ASX next week.
After launching in 2018 and receiving its ADI licence a year later, Judo is forecasting that it will make its maiden profit in the current financial year.
Proceeds of the offer are around A$653 million, made up of a $344 million issue of primary shares, with the remaining $309 million of “secondary shares” allowing existing shareholders to realise part of their investment.
The bank has previously raised $1.2 billion in equity funding from institutional investors and family offices.
At listing, the business lender will have a market capitalisation of around $2.3 billion. Net proceeds of around $250 million from the IPO will be added to regulatory capital.
Since it was launched in March 2018, Judo has originated more than $4.1 billion of loans to SMEs. The loan book grew 97 per cent to $3.5 billion in the year to June.
Led by former NAB head of business banking, Joseph Healy, Judo was granted a full ADI licence in April 2019.
One of the bank’s distinctive characteristics is that it uses an old-fashioned relationship model. At a time when almost all new lenders highlight their AI and data-driven automatic decisioning, Judo refers to the “craft” of banking SMEs and “seeks to build deep and trusted relationships with Australian SMEs”.
It is what the big banks used to do. Judo attributes much of its success to this approach, claiming “the commoditisation of judgment-based roles” has led to high levels of dissatisfaction among SMEs with their banks.
Currently, Judo has 91 relationship bankers (with 21 SME customers per banker), 32 relationship analysts and works with 835 accredited brokers.
It says it is not ignoring technology, which it will use to deliver data to assist with credit decisions and digital experiences for customers. It is a cloud-based bank with core banking services supplied by Temenos.
It targets businesses with annual turnover of up to $100 million, operating within 200 kilometres of capital cities and major regional centres (it has no agriculture industry exposure). Loan exposures range from $250,000 to $25 million.
Twenty-seven per cent of loans are originated through the bank’s direct channel. It plans to take this proportion up to 50 per cent over time, as brand awareness increases.
Judo’s funding come from a mix of deposits ($2.5 billion at June 30), warehouse facilities and (over the next few years) $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.
Net banking income was $89.7 million in 2019/20 and is forecast to grow to $162.3 million in 2021/22.
Its net interest margin in 2019/20 was 2.09 per cent and is forecast to fall to 2.03 per cent in the current financial year.
It is forecasting growth in its loan book from $3.5 billion in June to $6 billion at the end of the current year.