Judo Bank pitches first securitisation deal; mandates five banks

afr.com:

Judo Bank is preparing to tap the securitisation markets for the first time with a $350 million to $500 million deal as it looks to diversify its traditional funding mix of deposits and bank warehouses.

Judo Bank chief executive Joseph Healy. Justin McManus

A message sent to potential backers on Monday morning said the business lending specialist and its bank syndicate would kick off investor meetings on Wednesday. The goal would be to firm up interest in the Australian-dollar issue backed by small business loans, equipment loans and residential mortgages.

The deal comes less than two weeks after the $1.1 billion lender’s annual result disappointed investors, sending shares sharply lower.

Judo has mandated five investment banks for the deal including Citi, Société Générale, ANZ, RBC Capital Markets and Westpac. The issue size is set at $350 million with the potential to upsize to $500 million.

The deal is expected to be split into seven tranches. The top-most tranche, rated Aaa, would have $260 million available at an indicative spread of about 170 basis points above the one-month bank bill swap rate. The two tranches directly below it were expected to be completely pre-placed.

Shares in Judo have had a wild few weeks, sinking 13 per cent to $1.10 following its annual result and on concerns its margins will shrink this financial year as cheap funding rolls off. Analysts flagged a tougher outlook for revenue, greater competition, a fall in net interest margins and rising bad debts.

The bank debuted on the ASX in November 2021 at $2.10 a share after raising $653 million in an initial public offering.

So far, Judo Bank has relied on retail deposits and a warehouse facility to fund its operations. The bank expects wholesale