Judo Crashes -40% in due to 3 client issues. Oz Unemployment 4.4%, matching consensus.
Paper Mandate Market & Portfolio Commentary | 25 June 2026
Fund Status:
Bal Start: $1,176,668
Bought None
Sold: None
Bal End: $1,176,668
Cash: $163,532
Overnight Markets
US benchmarks diverged overnight as large caps slipped (S&P 500 -0.10%) while small caps gained traction (Russell 2000 +0.37%). Industrials (+1.18%) and Utilities (+1.05%) caught a bid, whereas Energy (-1.73%) and Tech (-0.64%) dragged. Brent crude retraced to US$73/bbl, which (yes) is back to pre-war levels. However, on Bloomberg’s Trumponomics podcast (highly recommended), Global Economics Director Jamie Rush highlighted that downstream refining infrastructure incurred more damage than upstream infrastructure. Consequently, rebuilding strategic reserves and normalizing supply will take time to fully match current demand. Spot prices may be reflecting future expectations rather than current realities. The energy supply issues are compounded by the damage to QatarEnergy’s LNG facilities, which resulted in them not able to meet their 5-year contracts.
Australian Market
The ASX closed down -0.68% amid mixed sector performance. Healthcare led the day (+2.56%), with Discretionary (+2.11%) following closely behind. Energy (-2.48%) and Materials (-2.28%) were the worst performing. The Australian unemployment printed at 4.4%, matching consensus.
Yet, the day was completely overshadowed by Judo Bank (JDO) collapsing -40%. Okay, here we go… Time to unpack the analyst call.
Judo Bank Call
Judo announced an increase in the Cost of Risk provision and downgraded FY26 guidance. While historical CoR (and Judo’s goal) hovers around 50 basis points, deterioration of the $65m from three 3 clients (in its $14.7b loan book) has driven the provision up to 84 bps. Judo defended its broader operational metrics, maintaining that PBT will still hit the top end of guidance, though this falls short of consensus expectations.
The downgrade stems from the sudden impairment of three discrete clients. Judo was unable to provide specific deal details. What we do know is that the trio represent $65m in total exposure, skewed to one client owing a higher proportion. Judo also confirmed that one client entered voluntary administration. Apparently, Judo’s regular loan reviews failed to provide “line of sight” on these issues because the loans were not past due. How inconsiderate of those clients to coordinate their defaults just before year end.
Consequently, the 90 days past due metrics increased to 3% of the loan book, up from 2.66% in December 2025. To defend profitability, Judo have adjusted the funding rates to 62bps above swap, which translates to a NIM increase from 3.15% to 3.20% (above the guidance). Judo also stated their FY27 PBT guidance of $210-220m would be maintained. While this represents a 30% growth yoy (driven by growing lending volumes), the consensus forecast is apparently $255m. A wide gap to cover.
On the bright side, Judo’s CET1 ratio is 12.4%, a good level of liquidity. This exceeds their target management range of 11.0% to 12.0%, the APRA minimum 10.25%, and matches the CET1 of two majors (ANZ, Westpac).
Portfolio Commentary
The portfolio declined -1.43%, trailing the ASX 300’s -0.69% drop. No prizes for guessing the culprit here. Judo holds a 4.0% weight at cost, which now is 2.0% at market weight. Now, we considered exiting the position, but this would crystallize losses at Judo’s lowest price since October 2023.
As a contrarian, our instinct was to buy an additional 0.5-1.0%. However, that would increase the cost base to near 5%, making it the largest exposure at cost. Given the lack of visibility of the floor, that concentration is unwise.
Our portfolio action was to hold the current weight and observe tomorrow’s response. This may well be an overreaction to the news. Aside from the three specific client issues, the core business is still sound. But the market tends to shoot first and asks questions later. Unlike the thesis break we saw with WiseTech, Judo’s announcement doesn’t break the long term investment case.
On the bright side, Lovisa (+5.1%), JB Hi Fi (+4.1%) and Life360 (+3.5%) posted good returns for the day.
Investment Activity
None.
Disclaimer: This is a paper portfolio. Content is for educational purposes only and does not constitute financial advice. Always do your own research.