Judo Bank loses its grip
The relationship bank should’ve seen trouble like this coming.
It took three customers – a window manufacturer, a financial planning firm, and a builder – to bring Judo Bank to its knees. These customers, guilty of nothing more elaborate than running out of money, wiped the better part of $800 million from the bank's market cap – a 40.8 per cent share price capitulation – on June 25.
Who these customers are we are not allowed to know. Judo Bank exercised its discretion there. However, one thing Judo is anything but discreet about is that it's a relationship bank. It said "relationship" 48 times in its latest annual report – a Hare Krishna-esque mantra, intoned over every smiling case study.
Judo Bank operates no antediluvian physical branches, its CEO Chris Bayliss boasts; its bankers all but move into their customers' premises. Presumably, then, being a relationship bank means using that proximity to borrowers to see the earliest signs of trouble.
That is what's so remarkable about June 25. Here was a bank that sells closeness, somehow blindsided by three borrowers with a total exposure of around $80 million, when the bank's average loan is about $3 million. For all the bank's relationship dribble, it knew squat about the real-time credit quality of some seriously outsized clients.
