JDO -46.3%: collapsed after slashing FY26 profit guidance and materially increasing its expected credit losses, overshadowing an otherwise stronger net interest margin outlook.
- Cost of risk: $116m-$122m (vs prior expectations materially lower)
- Pretax profit: $163m-$169m (previously $180m-$190m)
- Net interest margin: >3.2% (vs ~3.15% prior)
- 90+ day impaired loans: ~3% of gross loans
- CET1 ratio: ~12.4%
The downgrade was driven by a sharp increase in specific provisions relating to just three customer exposures across different sectors, highlighting the inherent concentration risk within Judo’s commercial lending book.
While management stressed these were customer-specific issues rather than a broader deterioration in credit quality, the market was clearly disappointed by the magnitude of the provisioning increase, and this flowed through to weakness in the other banks, particularly NAB which has a higher exposure to SME lending – the area in which JDO operates.
There were some positives, with net interest margin guidance upgraded above 3.2%, operating costs remaining well controlled and capital remaining strong. However, the focus shifted firmly toward asset quality, with impaired loans now expected to reach around 3% of gross loans by year-end. The result is a meaningful setback for confidence in the earnings outlook, explaining today’s record sell-off.
MM is now neutral on JDO ~91c
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