Judo Capital Holdings Ltd (ASX: JDO) shares are on the slide on Thursday.
In morning trade, the ASX 200 bank stock is down a massive 46% to 82 cents.
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Why is this ASX 200 bank stock crashing?
Investors have been selling the small business lender's shares after it released an update on expectations in FY 2026.
One item which appears to have caught the eye of investors is its FY 2026 cost of risk, which is now expected to be in the range of $116 million to $122 million.
Management advised that this reflects 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 Capital now expects 90-days-past-due (90DPD+) and impaired loans to be approximately 3% of gross loans and advances (GLA) at 30 June.
One positive is that collective provision coverage at 30 June is expected to remain broadly in line with its third-quarter trading update, which was 94bps of GLA or 1.09% of standardised credit risk weighted assets.
It notes that provisioning levels include a management overlay for sectors impacted by the uncertain macroeconomic environment.
Profit guidance
In light of the above, the ASX 200 bank stock revealed that its profit before tax in FY 2026 is now expected to be between $163 million and $169 million or approximately 30% growth on FY 2025.
This is down meaningfully on its previous guidance of between $180 million and $190 million.
Looking to FY 2027, management has provided profit before tax guidance of between $210 million and $220 million. This represents growth of 30% again and takes into account the uncertain macroeconomic and geopolitical environment.
Commenting on the news, the ASX 200 bank stock's CEO, Chris Bayliss, said:
We continue to see strong underlying momentum in the business. Recent credit outcomes have been driven by a small number of customers, who we are actively working with. 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.
