Bank Hapoalim’s Profit Rises on High Interest Rates Despite Public Backlash
JERUSALEM, Nov 18 (Reuters) – Bank Hapoalim (POLI.TA), one of Israel’s largest banks, reported a strong rise in third-quarter earnings, driven by high interest rates, and announced plans to distribute 40% of its net profit to shareholders. The announcement comes amid growing public discontent over rising mortgage and loan costs, which have added pressure on consumers already grappling with a high cost of living.
Hapoalim posted a net profit of 1.91 billion shekels ($513 million) for the third quarter, up from 1.67 billion shekels a year earlier. The bank attributed the increase to higher financing income, boosted by elevated interest rates and reduced provisions for potential loan defaults.
Critics, including lawmakers, have accused Hapoalim and its peers of benefitting from steep interest rate hikes on consumer loans and mortgages while being slow to offer better rates on savings accounts. The Bank of Israel, which has maintained a firm stance against further rate cuts since a small reduction in January, has signaled the potential for additional hikes if inflation—around 3.5% as of September 2024—remained elevated.
Amid efforts to replenish state funds strained by recent war expenditures, Israeli banks will face an additional 6% tax on domestic profits in 2024 and 2025, following a tax amendment approved earlier this year.
Despite the strong earnings report, Hapoalim shares fell 2% in late morning trading in Tel Aviv but have gained 27% year-to-date. The bank’s common equity Tier-1 capital ratio, a key measure of financial strength, increased to 11.90% as of September, well above the regulatory minimum of 10.23%.
Meanwhile, smaller rival Israel Discount Bank (DSCT.TA) reported a 39% increase in quarterly profit, driven by higher financing income, and announced plans for a share buyback in addition to a 40% dividend payout to shareholders.
($1 = 3.7239 shekels)
