Bank Hapoalim defers NIS 17.8 billion in loan and mortgage payments due to war
Bank set aside a provision for credit losses of NIS 662 million in the third quarter amid increased risk of an economic slowdown
Sharon Wrobel is a tech reporter for The Times of Israel.
Bank Hapoalim, one of Israel’s largest lenders, said it has allowed customers to defer loan and mortgage payments that total NIS 17.8 billion ($4.7 billion) due to the war with the Hamas terror group.
With the outbreak of the war, Hapoalim and other lenders, on orders of the Bank of Israel, introduced a series of benefits to help provide relief to financially strapped households and businesses located near the Gaza Strip, including a halt to mortgage payments for three months for customers living up to seven kilometers from the border, deferral of payments on loans and mortgages, and an exemption from interest and other fee charges.
War erupted in Israel after Hamas’s October 7 massacre, which saw 3,000 armed terrorists burst across the Gaza border into southern communities in Israel, killing over 1,200 people, mostly civilians, including babies, children and the elderly. At least 240 people were abducted and remain hostage in Gaza.
Hamas and other terror groups have continued to rain rockets on Israeli towns and cities in the north and south of the country, displacing over 200,000 Israelis and causing widespread damage despite the cover provided by the Iron Dome missile defense shield. The ongoing barrages of rockets have left many businesses closed and schools shut.
Hapoalim, the first of the country’s banks to publish its earnings for the quarter ended September 30, said that since the start of the war it has been “fully operational.”
“Moreover, the bank is entering the current period with high preparedness to cope with the potential effects of the war, in terms of solid capital buffers, ample liquidity, and a large credit-loss allowance buffer,” Hapoalim said in a statement.
Out of the NIS 17.8 billion in debt deferrals since the outbreak of the war, about NIS 9 billion are housing or mortgage loans that have been frozen, according to the bank’s financial statement for the third quarter.
The relief package adopted by Israeli banks is tailored to ease the credit and fee burden for four types of customers: households and businesses living within a 30-kilometer (19-mile) range of the Gaza Strip border, Israelis who have been evacuated from their homes, reserve soldiers, and first-degree relatives of Israelis who have been killed or abducted or are missing.
Hapoalim estimated that if all its customers who are entitled to the relief package fully exercise their benefits and allowances, the overall cost will be about NIS 420 million, which will be recorded in the fourth quarter of the year.
Israel’s largest lenders have generated record profits in 2022, enjoying the fruits of high interest rates on loans and mortgages. For households and businesses, the sharp increase in interest rates from a record low of 0.1% in April 2022 to 4.75% this year has rapidly fueled the costs of mortgage and loan holders, which is now more than ever weighing on their ability to make their monthly repayments.
Hapoalim said it saw its net profit in the third quarter of 2023 fall to NIS 1.67 billion from NIS 1.79 billion during the same quarter last year. The bank had set aside a provision for credit losses of NIS 662 million in the third quarter to “reflect the rise in the probability of an economic slowdown due to the consequences of the war.” During the same quarter in 2022, the provision for credit losses amounted to NIS 45 million.
Meanwhile, net interest income in the July to September quarter jumped 10.2% to NIS 4.01 billion versus the corresponding period in 2022.
Hapoalim said it halved its dividend payout to 20% of third-quarter net profit, from 40% in the previous quarter, “considering the bank’s significant capital surpluses and the BOI guideline concerning capital planning and profit distribution policy, in view of the war and the increase in uncertainty.” The bank’s board of directors has approved a dividend for the quarter in the amount of NIS 334 million.
