Judo Bank revels in unicorn status as investors tip in another $230m

The Sydney Morning Herald

Judo Bank’s valuation has pushed through $1 billion after its latest capital raising showed investors were willing to put a higher price on the business-focused challenger bank.

Judo, founded by former bankers David Hornery and Joseph Healy, will on Thursday say it has closed its third funding round, which raised an extra $230 million in capital.

The raising took place against the backdrop of the coronavirus crisis but attracted a higher price than previous rounds, and makes Judo the latest “unicorn,” which refers to a privately held start-up with a valuation of more than $1 billion.

As a result of the uncertainty created by the pandemic, Judo did not bring additional shareholders onto its register, which includes Bain Capital Credit, Myer Family Investments, Ironbridge and the Abu Dhabi Capital Group.

“The support we’ve received for our third round, at an increased valuation to our second round capital raise last year, underscores the confidence and commitment our existing investors have in Judo, particularly at a time of extreme volatility in global markets, that has impacted all bank valuations,” Mr Hornery said in a statement.

Judo is the largest of several challenger banks that have launched in Australia in recent years, at a time when regulators have sought to lift competition by lowering the hurdles for obtaining a licence to accept deposits from the public.

The startup banks are likely to require large amounts of capital to support their planned ramp-up of lending, at a time when banks’ margins are being squeezed by ultra-low interest rates and bad loans are set to rise sharply.

The raising takes the total capital raised by Judo since its 2018 launch to $750 million, and the bank said it was eyeing strong business loan growth, helped by access to government funding programs.

“We now have one of the strongest capitalised tier-1 ratios in the country, and intend on rapidly growing our national footprint, and expanding the products and services we offer to thousands of Australian SMEs, whose needs have long been ignored by the major banks,” Mr Hornery said.

Judo last month secured $500 million in government support to facilitate business lending through a small business funding scheme announced last year, and a separate program to bolster credit markets during the coronavirus pandemic.