Feb 12 (Reuters) - Australia's ASX Ltd ASX.AX warned of sharply higher 2026 costs on Thursday, extending a sell-off sparked by CEO Helen Lofthouse's planned exit and overshadowing a rise in first-half underlying profit.

The exchange operator now expects total expenses to rise 20%-23% this fiscal year, from 14%-19%, as it absorbs costs related to system outages, regulatory scrutiny, and a corporate watchdog probe.

Shares dropped as much as 2.6% to A$53.92, adding to the prior session's 6.2% slide and underperforming a 0.5% gain in the broader benchmark index .AXJO.

For the six months ended December 31, the bourse operator reported an underlying net profit after tax of A$263.6 million ($187.71 million), compared with A$253.7 million a year ago, helped by stronger trading volumes.

Cost pressures dominated the results, with expenses up 20% to A$264.3 million, driven by the regulatory probe, transformation spending and higher costs from ageing assets and intangible write-offs.

Lofthouse's planned departure comes as ASX faces intensifying scrutiny after a CHESS batch settlement failure in late-2024. ASX has since published an incident review and said it would provide an A$1 million credit disbursement to settlement participants through rebates.

ASX has drawn closer regulatory attention following recent operational glitches, including an August 2025 name mix‑up and a December announcements‑platform outage.

The leadership change also comes amid rising competition from Cboe Global Markets and a sweeping Australian Securities and Investments Commission $(ASIC)$ review of ASX's governance and operational risk management, with a final report due by March 31, 2026.

ASIC inquiry costs are expected to be at the top end of the A$25 million–A$35 million range.

ASX declared a fully franked interim dividend of 101.8 Australian cents a share, down 8.5% from a year ago, with a 75% payout ratio at the bottom end of its updated guidance range.

($1 = 1.4043 Australian dollars)

(Reporting by Roushni Nair and Shivangi Lahiri in Bengaluru; Editing by Krishna Chandra Eluri and Rashmi Aich)

((Shivangi.Lahiri@thomsonreuters.com; Roushni.Nair@thomsonreuters.com))