Judo Bank Raises Savings Rates Amid Rate Hike Competition

Judo Bank (ASX:JDO) has announced an increase in variable savings rates following the Reserve Bank of Australia's latest cash rate hike. The change, effective from Wednesday, applies to both new and existing savings customers. The move is part of Judo's strategy to attract and retain deposits, which are crucial for funding its small business loan portfolio.

The bank's savings products, including personal, business, and self-managed super fund accounts, are designed to offer simple, competitive rates without introductory bonuses. This approach helps Judo maintain a stable deposit base at a reasonable cost, which is essential for protecting its margins.

Judo's reliance on deposits is more pronounced than that of major banks, as it lacks a large transaction banking franchise. The bank's term deposit book is particularly important for matching funding against the term of its business loans. The recent rate rise will increase repayment burdens for small businesses, testing Judo's relationship-banking model, which aims to spot problems early.

Judo's annual general meeting later this month will be closely watched for updates on credit quality, loan growth, and margin trends. The lender has faced challenges this year, including provisions against soured loans in June, which raised concerns about credit quality. The market will be looking for signs of stabilization and reassurance on the bank's guidance for the current financial year.