Q2 2026 Bank Hapoalim BM Earnings Call Transcript
Key Points
- Bank Hapoalim BM (BKHPF) delivered a strong second-quarter 2026 with a return on equity (ROE) of 15%, or 16.4% excluding the special bank tax, exceeding its annual target.
- Credit growth was robust, with a 3.3% increase in the quarter and 14.3% year-over-year, driven by diversified expansion across retail, mortgages, mid-market, and corporate segments.
- The bank maintained excellent asset quality, with a very low non-performing loan (NPL) ratio of 0.5% and a robust allowance coverage of nearly 3 times, providing a significant cushion.
- Expense management was disciplined, with costs flat quarter-over-quarter and down 4.4% year-over-year, leading to a cost-income ratio of 30.6% and supporting profitability.
- The bank continued to return value to shareholders, maintaining a 50% payout ratio through cash dividends and share buybacks, while keeping a strong CET1 capital ratio of 11.3%.
- Financing income grew 13.7% quarter-over-quarter, boosted by a high CPI contribution of ILS431 million and strong business activity, despite headwinds from lower interest rates.
- The bank's unique financial app gained 3.5 million active customers, with two-thirds conducting primary banking elsewhere, and B2B transaction volumes grew to ILS2.9 billion.
- Management reaffirmed its 2026 guidance for net profit of ILS8.5-9.5 billion and ROE of 13-14%, with plans to return to a 14-15% ROE target in 2027.
- The bank's liquidity position remained strong, with LCR at 126% and a well-diversified funding base, including the largest retail deposit base in Israel.
- The Israeli economy rebounded strongly in the second quarter, with improvements in exports, private consumption, and investments, supporting the bank's growth outlook.
- The special bank tax negatively impacted the bank's ROE by 1.3-1.4% on an annual basis, reducing reported profitability.
- Net interest margin (NIM) was adversely affected by lower interest rates and competitive pressure, with the average Bank of Israel rate declining 11 basis points in the quarter.
- Provision for credit losses increased to ILS298 million (0.22% cost of risk), reflecting collective provisions due to ongoing uncertainty and no exceptional recoveries.
- The allowance ratio declined slightly to 1.65% despite an increase in the absolute allowance balance, indicating a marginal reduction in coverage.
- Retail deposits decreased slightly as customers shifted funds to capital market products, potentially impacting the bank's funding mix.
- The CET1 capital ratio decreased to 11.3%, just above the internal target of 11%, due to strong growth and high payout ratio, reducing capital buffers.
- The housing market showed a decrease in transaction levels and an accumulation of unsold apartments, with potential for further moderate price declines in the next 12 months.
- Geopolitical uncertainty persists, with the bank maintaining a conservative provisioning approach and no material reserve releases expected in the near term.
- Expenses, while controlled, still face headwinds from labor cost inflation in Israel, and the early retirement program savings are expected to be offset by ongoing cost pressures.
- The bank's growth guidance of 8-9% for 2026 may be conservative, as first-half growth already reached 7%, but management did not update the full-year target.
Ladies and gentlemen, thank you for standing by. Welcome to the Bank Hapoalim second-quarter of 2026 results conference call webinar. For your convenience, this call will be accompanied by a presentation. May we suggest if you have not yet done so, that you access the presentation on the bank's website, www.bankhapoalim.com by clicking on Financial Information on the homepage and then click on the second-quarter 2026 report presentation.
(Operator Instructions)
As a reminder, this conference is being recorded August 11, 2026. With us on the line today are Mr. Ram Gev, CFO; and Ms. Tamar Koblenz, Head of Investor Relations. I would like to remind everyone that forward-looking statements for the respective company's business, financial condition and results of its operations are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated.
Such forward-looking statements include, but are not limited to, product demand, pricing, market acceptance, changing
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