Major lenders’ profits soar as banks cash in on wartime interest rate growth
As homes and businesses grapple with loan repayments, Hapoalim sees quarterly profit rise 14% fueled by NIS 4.58b in net interest income; Discount’s profit jumps 39%, Leumi’s 30%
Sharon Wrobel is a tech reporter for The Times of Israel.
Banks saw their third-quarter net profits jump 14 to 39 percent, they reported this week, as borrowing costs for mortgage and loan holders remained high, which helped fuel the lenders’ net interest income.
The country’s banks have come under fire for profiting from the fruits of high interest rates on loans and mortgages while households and businesses have been struggling to make repayments and the cost of living continues to rise during the war period.
Since war with the Hamas terror group broke out on October 7 last year, the central bank cut interest rates only once in January, as the inflation environment remained high. Borrowing costs have remained at 4.5 percent, burdening households and businesses as the economy is getting battered due to the ongoing war.
Bank Hapoalim, one of Israel’s two largest lenders, posted a net profit of NIS 1.91 billion ($513 million) in the July to September period, an increase of 14% from the NIS 1.67 billion earned during the same period a year ago.
High borrowing costs fueled Hapoalim’s net interest income to NIS 4.58 billion in the third quarter up from NIS 4 billion a year earlier. Credit loss provision fell to NIS 406 million from NIS 662 million during the same comparative period. Net credit to the public grew 6.4% over the past year.
“The growth in the credit portfolio is a result of suppressed demand that had built up in recent months, due to the war and the high level of uncertainty, and was released as individuals and businesses adjusted to the situation,” Hapoalim said.
Hapoalim announced that it will distribute a dividend of 40% of net profit to shareholders, of which NIS 512 million will be paid in a cash dividend and NIS 250 million through a share buyback plan.
Bank Leumi, the country’s other top lender, reported a 29.8% increase in net profits during the third quarter, also cashing in on high interest rates paid by mortgage and loan holders.
Leumi’s quarterly profit of NIS 2.3 billion ($617 million) is up from NIS 1.8 billion ($482 million) during the same period last year.
Net interest income increased by 4.5% to NIS 4.5 billion ($1.2 billion) in the quarter compared with NIS 3.9 billion ($1.04 billion) a year ago.
Leumi said its loan portfolio in the third quarter grew by 7.1% compared with the corresponding period last year. Deposits by the public rose by 8% in the third quarter compared with the same quarter last year.
Leumi plans to pay a quarterly dividend of 40% of net profit to shareholders, out of which NIS 688 million ($185 million) is a cash dividend and the remainder will be paid out from a share buyback.
Israel Discount Bank, the country’s fourth-largest bank, earned NIS 1.1 billion ($295 million) in the July to September quarter, up 39% from the NIS 817 million generated a year earlier. Net interest income increased 5.8% to NIS 2.9 billion year-on-year.
Meanwhile, Discount Bank’s credit portfolio continued to grow. Net credit to the public grew by 3.2% in the third quarter and stood at NIS 277 billion at the end of September.
“The quarterly results reflect growth throughout the group and strong financial indicators that show its strength and resilience,” said Discount Bank CEO Avi Levi. “Despite the resilience of the economy, the [security] situation calls for caution and determined measures by the government to encourage sustainable growth.”
Discount Bank’s board of directors decided to pay a quarterly dividend of NIS 341 million, or 30% of net profit, to shareholders, in addition to another 10% of profit in the form of a share buyback of NIS 114 million.
