Source: Kapitales Research

Highlights:

• The bank raised its FY26 cost of risk guidance following higher provisions on three customer exposures.
• Despite the asset quality update, the company reaffirmed expectations for strong lending growth and improved margins.
• Management continues to forecast approximately 30% profit growth for both FY26 and FY27.
• Judo Capital Holdings Limited slumped 38.9% to $0.937 after the bank updated investors on FY26 asset quality, revealing higher-than-expected credit provisions linked to three customer-specific exposures across different sectors.

Although Judo reaffirmed its broader growth outlook, investors reacted sharply to the increase in expected credit losses, overshadowing continued strength in lending activity, net interest margins and profitability guidance.

Stocks in Focus

• Judo Capital Holdings Limited (ASX: JDO) fell 38.9% to $0.937 after revising its FY26 cost of risk guidance higher due to increased provisioning on a small number of customer exposures.

Why Investors Are Selling

Judo now expects its FY26 cost of risk to be between AU$116 million and AU$122 million, reflecting additional specific provisions arising from three recently identified customer-related developments. The bank also expects impaired and 90-days-past-due loans to represent approximately 3% of gross loans and advances at 30 June 2026.

Despite the deterioration in asset quality, Judo said lending momentum remained strong. Gross loans and advances are expected to reach AU$14.6 billion to AU$14.7 billion by the end of FY26, while second-half net interest margin is now forecast to exceed 3.2%, above previous guidance of around 3.15%. The bank also maintained guidance for FY26 profit before tax of AU$163 million to AU$169 million, representing approximately 30% growth from FY25. Looking ahead, management expects FY27 profit before tax to increase to between AU$210 million and AU$220 million, supported by continued operating leverage and business expansion.

Sector Outlook

The sharp share-price decline highlights the sensitivity of banking stocks to changes in asset quality and credit risk, even when underlying lending growth and profitability remain resilient. Investors are likely to monitor Judo's credit performance, provisioning trends and loan portfolio quality closely as economic uncertainty continues to influence the banking sector.

Note- All data presented is based on information available at the time of writing.

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