Isracard is laying off 250 employees or 12% of its workforce as Israel’s largest credit card company is embarking on a plan to streamline costs and operations.
As part of an efficiency plan, which was approved by Isracard’s board of directors on Tuesday, 250 jobs will be cut by the end of 2023, the financial service provider announced in a filing to the Tel Aviv Stock Exchange on Wednesday. The headcount reduction is the result of changes in organizational structure, streamlining procedures, and downsizing of units.
Isracard expects to incur a one-time expense of NIS 30 million to NIS 35 million ($8.7 million to $10.1 million) before tax for compensation of the laid-off employees, which will be included in the company’s 2022 financial results. The implementation of the efficiency plan is estimated to lead to savings of NIS 55 million to NIS 65 million a year, the company said.
Isracard shares rose more than 2% in intraday trading in Tel Aviv following the announcement.
“In accordance with the group’s strategy and developments in the competitive market in which we operate, we need to make the company more flexible, efficient and focused so that Isracard has a significant competitive advantage and leads the market,” said Isracard CEO Ran Oz. “Unfortunately, as part of this process, reducing the number of employees is a necessary reality.”
Isracard said that the efficiency plan is being carried out in full cooperation with the workers union and includes negotiation for a variety of solutions and assistance programs for employees who are made to leave the company.
“The first fruits of the strategic plan are already visible on the ground, in the form of double-digit growth in credit portfolios for private customers and the business sector, a decline in various operating expenses and a focus on business,” Isracard said in a statement.
The staff reductions come less than a month after Isracard reported financial results for the third quarter posting a profit of NIS 60 million, down 40% from the same quarter last year.
Commenting on Isracard’s announcement, Lior Shilo, financial services analyst at IBI investment house, said the company’s plan is a move in the right direction as credit card companies have been slow to embrace the digital transformation of tools and services to cut their operational expenses and become more efficient compared to the banking sector in Israel.
“Isracard still has a long way to go to improve its efficiency ratio,” Shilo told The Times of Israel.
Back in 2019, Israeli regulation required Bank Hapoalim to divest itself of Isracard, which was part of a move to enhance competition in the credit market by separating the banks from the credit card companies. The credit card company’s shares started trading in Tel Aviv in 2019 after Hapoalim sold a 65.2% stake in the business.