Judo Bank shares plunge 46pc as bad loan provisions blowout wipes almost $800m from market value

SME lender Judo Capital Holdings (ASX: JDO) has seen almost $800 million stripped from its market value after the bank slashed its full-year profit guidance, revealing that three specific loan exposures had deteriorated amid tougher trading conditions for its business customers.

Shares in the Judo Bank parent plunged as much as 46 per cent to 82 cents this morning, down from yesterday's close of $1.535.

The wipeout followed the bank's disclosure that the deterioration had pushed its expected FY26 cost of risk to between $116 million and $122 million, well above the 70 to 75 basis points of average gross loans and advances it had guided just two months earlier.

The bank now expects profit before tax of $163 million to $169 million for the year ending 30 June, a sharp downgrade from the $180 million to $190 million range Judo reaffirmed in its third-quarter trading update on 24 April.

Judo says the three exposures sit across different sectors and had worsened after the customer-by-customer review undertaken during the third quarter, reflecting "recent, borrower-specific developments".

The bank expects loans that are 90 days past due or impaired to reach about 3 per cent of gross loans and advances by 30 June, up from 2.65 per cent at 31 March.

"Recent credit outcomes have been driven by a small number of customers, who we are actively working with," says Judo CEO Chris Bayliss.

"These exposures have deteriorated subsequent to the customer-by-customer review undertaken in the third quarter and reflect recent, borrower-specific developments.

“While today’s update is partly a result of the macro environment, it is nevertheless disappointing.

"Regardless, we remain confident in the strength of our underlying business and the quality of the portfolio.

"We have a proven customer value proposition, are profitable and well capitalised, and have a clear path to achieving a return on equity in the low-to-mid teens.”

Bayliss also points out that the business is still seeing "strong underlying momentum".

But that couldn't stop a mass exit by investors who sold Judo Capital's shares down to a low not seen in more than two years.

Judo's market value shed as much as $796 million at today's 82c-per-share low point, although the shares rebounded slightly to be trading at 92c at 11.48pm (AEST).

The latest downgrade comes on the heels of Judo's Q3 update in April, when the bank reaffirmed its prior guidance while flagging it had bolstered provisions as a precaution against geopolitical and macroeconomic uncertainty.

At that point, management struck a cautiously optimistic tone, noting that credit quality metrics remained within expectations.

The speed of the reversal underscores the fragility facing specialist business lenders as pockets of the SME sector come under strain.

The Reserve Bank of Australia's March 2026 Financial Stability Review noted that business non-performing loans across the banking system had edged higher, particularly in the hospitality and construction sectors, though broader spillovers to the financial system from insolvencies had been contained.

Judo, which was founded in 2016 and listed on the ASX in 2021, has built its franchise as a challenger to the major banks in SME lending, pitching relationship-managed service against what it describes as the increasingly automated approach of the big four.

Despite the provision blow-out, the bank says its net interest margin and loan growth remains in line with prior guidance, suggesting the underlying lending business continues to perform.

Judo’s FY26 result announcement is scheduled for 18 August 2026.