Judo Bank bags $174 million, as it becomes third-fastest growing SME lender in Australia

Small business-focused neobank Judo Bank has secured another $174 million in capital, as it becomes the third-largest bank lender to the SME sector by net lending growth.

The new funding is comprised of $124 million in equity funding, including repeat backing from 14 of its top 20 investors.

The other $50 million is regulatory supplemental capital coming from the issuing of Tier 2 notes, with participation from “a small group of leading Australian fixed income institutional investors”, chief financial officer Chris Bayliss said in a statement.

This latest raise brings Judo’s total capital raised to $1.2 billion, and boosts its valuation to $1.9 billion.

That’s a 19% increase in value compared to the bank’s $284 million raise just six months ago.

It also follows a year of strong growth as the COVID-19 pandemic has shaken up the small business sector.

Judo has seen a 100% increase in its business lending activity since March last year, with May 2021 representing the bank’s largest month of loan originations since launch.

It is now the third-largest bank lender to the business sector, by net lending growth. With a loan book of $3.3 billion and a lending pipeline of $2.5 billion, it has overtaken three of the Big Four and now sits behind only Commonwealth Bank and Macquarie.

According to a statement, the neobank is also generating cash profits, becoming “one of the very few new banks anywhere in the world to have achieved profitability within three years of launching,” Judo co-founder and chief Joseph Healy said.

The fresh funding will allow the bank to double down on this growth, he added, particularly in support of small businesses as they strive to recover following the COVID-19 pandemic and economic downturn.

“The foundations for Judo are now well-established, and shareholders will benefit as the business continues on its rapid growth trajectory and Judo begins to generate its own organic capital,” Bayliss said.

“The execution of a Tier 2 transaction adds efficiency and diversification to our capital structure, and is further validation of our business model.”