The Judo Capital Holdings Ltd (ASX: JDO) share price has sunk around 40% after the company announced a difficult update for FY26.
Judo is a bank that lends to small and medium enterprises (SMEs). It also offers term deposits for individuals, businesses and SMSFs.
Three difficult loans
Judo said that it expects its FY26 ‘cost of risk’ to be in the range of between $116 million to $122 million, reflecting an increase in specific provisions primarily driven by three exposures across different sectors that have recently emerged, as a result of “customer-specific developments”.
Judo said it now expects 90-days-past-due and impaired loans to be approximately 3% of gross loans and advances (GLA) as at 30 June 2026, including the impact of those three difficult loans.
Its collective provision coverage for FY26 is still expected to remain broadly in line with the third quarter trading update, which was 0.94% of GLA. Judo said provisioning levels include a management overlay for sectors impacted by the uncertain macroeconomic environment.
FY26 update
Judo said it has maintained solid lending momentum going into the final quarter of FY26, with GLA reaching more than $14.4 billion as of 24 June 2026. It expects to finish the financial year at between $14.6 billion to $14.7 billion at 30 June 2026.
The ASX bank share said that its net interest margin (NIM) is now expected to be more than 3.2% in the second half of FY26 – that’s a measure of how much profit it’s making on its lending, which includes both the loan rate and how much it’s paying for funding (term deposits and so on).
That guidance for NIM is higher than the previous guidance of around 3.15%, supported by “favourable term deposit costs”.
Judo said its AAA lending pipeline (applications, approved and accepted) was “robust” at $2.4 billion, with a margin of 4.3% at the end of May.
It also said it has continued to manage operating costs “prudently”, with the cost-to-income for the second half of FY26 on track to be “below” the first half of FY26 of 48.5%, in line with existing guidance.
The company expects its FY26 profit before tax (PBT) to grow by approximately 30% year on year to between $163 million to $169 million.
FY27 outlook
The bank said that it expects FY27 PBT to be in the range of $210 million to $220 million, representing growth of another 30%, which takes into account the uncertain wider economic landscape, while demonstrating its ability to deliver strong growth and operating leverage.
It also said it has a “clear path” to achieve a return on equity (ROE) “in the low-to-mid teens”.
It also said it will “transition to operating with a management CET1 target range of 11% – 12% in normal operating conditions”.
Final thoughts on the Judo share price
It’s a shame to see this update from Judo, because it’s one of the more promising ASX growth shares. This big sell-off could be a useful, long-term buying opportunity considering it’s still guiding 30% profit growth for both FY26 and FY27.
Hopefully these are the only sizeable troublesome loans for the business, though some investors may want to look for investments that face less near-term uncertainty.
