Judo’s co-founders say the budget should provide a boost to confidence, but stimulus is needed through to the middle of 2021 to save many SMEs.

Judo’s internal analysis has found almost 8 per cent of the 2 million SMEs, mostly at the smaller end of the market, may not recover from the crisis. “What we do know, of course, is there is going to be a whole number of small businesses that will go out of business and right now, a number of small businesses are on a lifeline,” Mr Healy said.
“It is difficult to be precise in terms of figures, but at the smaller end of SMEs and thinking about businesses that depend on foot traffic in the CBD, for example a lot of them are going to find it very difficult to recover.”
I don’t want to tempt fate but we have stood up really well to the real world stress test.
Joseph Healy, Judo Bank
He also pointed to $40 billion of “unproductive debt” that will be sitting as a deadweight cost on balance sheets come March next year, including deferred taxes, loans and rent, and other creditor payments. “Solving that problem will be so important to prevent it becoming a big drag on the recovery,” he said.
Judo currently has $1.8 million in bad debts, out of $2.4 billion of loans. It has been focusing on supporting customers given its response to the crisis will define the reputation of the new bank for years to come. He said bankers are helping customers innovate to service, including a gym owner who decided to rent equipment to clients in their homes, and a Sydney CBD restaurant that has used the shutdown to renovate its kitchen and is now doing 70,000 home delivered meals a week.
“I don’t want to tempt fate as we are not out of this, and we won’t be out of this until the middle of next year, in our view but we have stood up really well to the real world stress test,” Mr Healy said.
The repeal of responsible lending laws two weeks ago should not be underestimated because banks had interpreted them after the royal commission with “ultra-conservatism” and restricted the flow of credit, he said.
But getting consumers whose loan repayments are deferred into regular payments could be a challenge, given psychology suggests that after 65 days behaviour more easily develops into a habit.
“There is a still a lot of water to go under the bridge,” David Hornery, Judo’s other co-CEO and co-founder, told the briefing over Zoom.
The government’s responsiveness, the substance of its policies, and “how, in some ways, self-effacing they have been rectifying things not working, is a credit to them”, Mr Hornery said. The challenge is political management of the transformation of emergency measures into more a “sustainable series of structural incentives or drivers”.
Last month, Judo ranked one on LinkedIn list of most desirable start-ups to work. Mr Healy said 17.5 people are applying for each role it is filling: it is making 20 new hires each month, taking the current workforce to 250, with 60 per cent in customer facing roles. Only three staff have left since it was formed. Judo doesn’t pay short term bonuses but offers staff equity in the bank.
Given this recession is the first for 29 years, its bankers aren’t used to dealing with customers facing distress and “not just distress in a financial sense, but distress in a mental health sense because that is a big factor in so many businesses and with our staff too”, Mr Healy said.
He applauded NAB CEO Ross McEwen for putting all staff through a new FINSIA professional training course to lift standards, while Mr Hornery said creating a new sense of professionalism in the banking sector would allow it to restore its image and reflect that a bank’s fundamental role is to be a “servant of the economy, not a unilateral force within it”.