Last Thursday, Bank Hapoalim released its results for the third quarter, and announced net profits for the quarter of NIS 2.8 billion, half of which will be distributed as dividends. This concludes the quarterly reports of the five major banks: Leumi, Hapoalim, Discount, Mizrahi-Tefahot, and First International.
The banks have been subjected to continuous attacks in recent months from members of the Knesset, the Minister of Finance, and others. Their huge profits stem largely from the high interest rate environment (the Bank of Israel’s key interest rate is 4.5%, although it may start to fall tomorrow when the central bank announces its interest rate decision). Total bank profits during the third quarter amounted to 8.7 billion shekels, an increase of 17% compared to the corresponding quarter of 2024.
Banking Supervisor Daniel Hahiashvili decided to allow banks to distribute up to 75% of their profits, but only two decided to do so: Leumi and First International. However, the total dividend payout amounts to NIS 5.2 billion, or 60% of total profits. This represents a 75% increase in the dividends paid by banks in a year. However, the Tel Aviv Banks 5 Index fell just over 2% last week.
Bank results are good, but it is important to pay attention to the change in trend, according to Moti Citrin, vice president and head of financial institutions and structured finance at Moody’s Medrog in Israel. “On the basis of the financial statements published, the trend in the banking system appears to remain positive, characterized by double-digit returns on equity, continued growth in the credit portfolio, and impressive profitability, which continues to be influenced by wide financial spreads, along with fairly high income from commissions as activity in the capital market expands and continues to rise.”
However, he says, “We must be aware of the potential erosion in asset quality and later weaker outcomes due to the erosion of financial spread as a result of moderating inflation and the expected interest rate cut by the Bank of Israel this month. Moreover, there is the prevailing weakness in the real estate sector and the erosion of payment ethics in the economy as insolvencies become more common.”
From our conversations with the banks themselves, it appears that a decline in fighting may actually lead to economic difficulties. They say the situation currently looks good, but they are preparing for more negative scenarios. Bank Hapoalim took the most important step by increasing its overall allowance for credit losses.
In this context, Citrin says: “A significant reduction in transfer payments by the state to reservists, evacuated families and companies would further erode the financial strength of borrowers. I do not expect a dramatic occurrence, but I certainly expect a certain decline in banks’ returns on stocks, even before taking into account the possibility of higher taxes on banks.”
Published by Globes, Israel Business News – en.globes.co.il – on November 23, 2025.
© Copyright Globes Publisher Itonut (1983) Ltd., 2025.
The post Bank stocks indifferent to huge dividend payout first appeared on Investorempires.com.
