Judo Bank 3yr Senior Unsecured

Judo Bank (S&P: BBB-/Positive) are in the market with a 3yr AUD floating/fixed senior unsecured deal.

Indicative pricing is expected to be around the 6% yield mark. As at 13/09, this equates to an indicative margin of 230bps above ADSWAP3 or 3mBBSW respectively.

Judo Bank are a unique pure play, SME business lender. Unlike the major banks, Judo have no legacy systems, and so can provide a specialist SME proposition with scale. Judo successful IPO in 2021 provided AUD1.5bn in equity. All FY22 prospectus targets have been exceeded.

Risk management is also good. Credit quality remains strong with 90+ day past due representing 0.01% of GLA (one customer) at FY22.

Based on current conditions, Judo expect to achieve an underlying NIM >3% for FY23.

Judo’s growth appetite is likely to remain strong as it becomes Australia’s SME bank of choice. The bank had a loan book of AUD6bn as of FY22 (growing 73% in the past 12 months). It’s capital position (as measured by S&P’s (RAC) ratio) is above 20% giving ample buffer for a stressed scenario. The funding base is still heavily reliant on deposits and thus the proposed senior unsecured transaction.

Relative Value

Indicative pricing is expected to be around the 6% yield mark. As at 13/09, this equates to an indicative margin of 230bps above ADSWAP3 or 3mBBSW respectively.

The new Judo makes the Liberty BBB- floating curve look very attractive. However, the Judo floating line still offers around 100bps pickup to the BBB financial floating curve. There are few financial fixed comps – however, the Judo fixed line stands out versus Bank of Queensland and Barclays respectively.

Floating

Fixed

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