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The ‘first of its kind’ transaction was a $500 million capital-relief securitisation transaction backed by SME business loans, lines of credit, equipment loans and mortgages.
Judo Capital Holdings Limited (Judo) has successfully priced its inaugural capital-relief securitisation transaction.
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The $500 million transaction – which was upsized from its launch amount of $350 million – is backed by small and medium-sized enterprise (SME) business loans, lines of credit, equipment loans and residential mortgages.
It was supported by both domestic and international investors and is expected to settle on 21 September.
According to the lender, the transaction is the first of its kind in Australia and establishes a new source of funding for the bank.
As well as providing access to funding, the issuance also qualifies for regulatory capital relief, which the bank said would be accretive to its CET1 ratio.
Judo Bank suggested that it would continue to look to issue these transactions on a “programmatic basis”.
Speaking of the move, Judo Bank’s chief financial officer, Andrew Leslie, said the lender was “very pleased with the strong support” it received for this transaction, adding that while term deposits would remain Judo’s primary source of funding, the new stream “bolsters the diversity and surety of [its] funding”.
Mr Leslie said that the inaugural transaction demonstrated the “strength and sophistication” of the bank’s treasury capability in wholesale markets and would support its continued growth in lending to the SME space.
However, earlier this year, the listed lender suggested that there would be an ‘uneven’ economic environment in FY24.
According to its CEO Joseph Healy, there will be a “soft landing” for the economy following the fastest monetary policy tightening cycle since the mid-1980s but any recovery will be ‘uneven’, with some business sectors experiencing more hardship than others.
While delivering its full-year results for the financial year ended June 2023 (FY23), the CEO stated that while the bank will be targeting continued growth in FY24, this growth would be “measured”.
Mr Healy said: “Clearly when we look at the economic environment, we’re very conscious that the journey in 2024 is going to be unsettling for the economy … It’s not going to be an even soft landing, it will be uneven. There’ll be some sectors of the economy that will find it more difficult than others.”
The financial results for FY23 showed that the bank had been reducing its exposure to commercial real estate (from 29 per cent to 22 per cent) and would be looking at managing its exposure to commercial real estate through “disciplined lending” in this segment.
The bank said it would also apply “strong due diligence” to segments that rely on discretionary spending, such as retail, given that cost-of-living pressures have resulted in consumers tightening their belts.
“I think that we are still at a very early stage of that [belt tightening] and I would expect consumer expenditure will tighten further over the course of the next 12 months,” Mr Healy said.
Given the fact that the economy is “a more challenging economy than the one that we’ve seen in recent times”, the Judo Bank CEO said the lender would therefore “continue to be very vigilant on credit risk and monitor exposure”.
He said Judo Bank would be “growing in a very measured way” but added, “Notwithstanding what is an uncertain economic outlook, we remain very confident about our ability to navigate whatever conditions we have in front of us and deliver a continuation of the journey towards business metrics at scale.”
[Related: ‘Uneven’ soft landing for economy in FY24: Judo Bank]
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