Macquarie, Westpac and Bendigo in the spotlight as potential buyers of Judo

Judo co-founder and departing chief executive, Joseph Healy.

The focus has turned to Macquarie and Westpac as possible buyers of Judo Bank.

Sources say Macquarie has been running the numbers on Judo for a potential acquisition of late, while there’s speculation that Judo was recently on the mind of Westpac boss Peter King.

Judo has top level technology at a time when Westpac needs to spend in the area, and it would be an easy way to grow its small and medium customer base. Westpac could run it with a far cheaper funding.

Most of Judo’s customers are businesses rejected by the top four banks or those who want a lender with a more old-fashioned relationship focus.

Westpac might run it as a separate entity and keep the aspects of Judo that make it unique.

Then there’s Bendigo Bank to think about, with some wondering why it still hasn’t carried out a major acquisition since ANZ’s $4.9bn move on Suncorp.

Many believe it’s a no brainer: Bendigo should buy Judo in a scrip merger deal as a way to grow and gain new technology. But there’s still no word on that front yet, though its board is certain to have at least been giving it serious thought.

Macquarie is becoming a far more dominant force in the lending world, taking on the top four Australian banks to grab market share in mortgages.

But much attention is with the regional banks, with suggestions that Bendigo Bank may be closing in on the $1bn-plus Judo Bank. Bendigo is under pressure to grow to compete with the major banks, and an acquisition of Judo would provide not only scale but a sizeable entry into the business lending market

Judo was co-founded by outgoing chief executive Joseph Healy in 2016. It listed successfully in 2021 with a $2.3bn market value, equating to 1.7 times its book value.

It’s been tough going since then as interest rates rose, with its capital costs higher than those of Bendigo Bank.

Those costs would fall by as much as 150 to 200 basis points in a merger, and even more so under Westpac’s ownership – from over 6 per cent to 3 per cent.

Bank of Queensland’s shares have fallen more than 40 per cent in the past year, yet its challenges following its ME Bank acquisition integration and technology upgrade mean suitors are sidestepping the lender for now.

Bank of America is working for Bendigo Bank, while Barrenjoey is among the advisers for Judo.

Judo’s book value in September was $1.40 per share and its shares are now trading at $1.30. For the six months to December, Judo reported a $46m net profit and a pre-tax profit of $67.4m, up 24 per cent on the previous corresponding period, with its deposits at $6.9bn.