The Judo Capital Holdings Ltd (ASX: JDO) share price is up more than 9% after the company announced a large transaction.
Judo provides loans to small and medium businesses, with term deposits for individuals, businesses and SMSFs being a significant funding source.
Upsized transaction
Judo announced that it has successfully priced a $750 million capital relief securitisation transaction, backed by small and medium enterprise (SME) business loans.
The ASX share said the transaction attracted strong investor support, enabling Judo to upsize the transaction from an initial launch amount of $500 million to $750 million.
It said that notes priced at a weighted average of 171 basis points (1.71%) over 1-month (BBSW).
Judo says this represents improvement of 102 basis points (1.02%) compared with Judo’s inaugural transaction completed in September 2023 which was 273 basis points (2.73%) over 1-month BBSW.
How will this affect the financials?
The ASX share said the transaction qualifies for regulatory capital relief. After the transaction is completed, Judo’s Common Equity Tier 1 (CET1) ratio will increase. As a result of this transaction, its pro forma CET1 at 31 March 2026 would have been 13.2%, compared to the previously reported CET1 ratio of 12.6% at 31 March 2026.
Judo said it won’t impact the reporting of loans in Judo’s accounts. The underlying business loans will continue to be reported as gross loans and advances, and generate interest income.
The company also said that as the transaction qualifies for capital relief, the transaction is “highly accretive to Judo’s return on equity (ROE)”.
Judo said it will generate a significant net interest margin (NIM) – profitability on lending taking into account the loan rate and funding costs – on the underlying business loans without needing to hold capital for these assets.
Assuming a normalised level of capital, the transaction is estimated to deliver a pro forma benefit to FY27 ROE of between 25 basis points to 30 basis points (0.25% to 0.30%).
Outlook for the Judo share price
Judo also said this will help support lending growth while improving its ROE. It also noted that it has multiple levers to actively manage capital, providing increased optionality, including the “potential to consider capital management initiatives in due course”.
I think Judo is definitely one to watch. It’s growing its loan book at an incredibly fast pace and its margins are healthy (and improved with this announcement).
It’s one of the ASX growth shares I’d consider for my portfolio if that was the type of business I actually buy.
