Bank Hapoalim reported a net profit of NIS 2,488 million for the second quarter of 2026, an increase from NIS 2,124 million in the first quarter, driven by strong growth in financing income and disciplined cost management. The Tel Aviv-based lender maintained robust credit quality with a non-performing loan (NPL) ratio of 0.50% and declared a total profit distribution of NIS 1.2 billion, including a cash dividend of NIS 0.76 per share payable on August 27, 2026. Return on equity (ROE) stood at 15.0% for the quarter, or approximately 16.4% excluding the impact of the special tax on banks.

The improvement in profitability was primarily fueled by a 19.8% quarter-on-quarter increase in total income, largely due to a 23.8% surge in financing income. Income from regular financing activity reached NIS 5,109 million, up 13.7% from the previous quarter, aided by a higher contribution from the Consumer Price Index (CPI) — which contributed NIS 431 million in 2Q26 compared to a negative NIS 33 million in 1Q26 — and growth in lending, deposits, and dealing rooms. Fee income also rose 2.7% to NIS 1,145 million, driven by credit card fees and securities activity. Operating and other expenses remained flat compared to the prior quarter, helping reduce the cost-income ratio to 30.6% from 36.6% in 1Q26.

Despite the operational gains, net profit was weighed down by an increase in the special tax imposed on banks, which rose from NIS 1.3 billion in 2025 to approximately NIS 3.0 billion in 2026. This tax impact reduced ROE by 1.3%–1.4% annually. Excluding this tax, ROE for 2Q26 would have been approximately 16.4%, compared to 14.4% in 1Q26. Profit before tax increased 6.4% year-over-year to NIS 4.3 billion, reflecting underlying business strength despite an average interest rate decline of 11 basis points during the quarter.

Balance Sheet and Credit Quality

Bank Hapoalim’s net credit to the public grew 3.3% quarter-on-quarter to NIS 536.2 billion, with diversified growth across corporate, commercial, and retail segments. Corporate credit increased 4.8% QoQ, while housing loans grew 2.0%. Total deposits reached NIS 618.1 billion, up 2.5% from the previous quarter, although retail deposits declined slightly by 0.3% as customers shifted funds to capital-market products. Credit quality remained strong, with the NPL coverage ratio at 284% and the allowance for credit losses at NIS 9.0 billion (1.65% of total credit). The provision for credit losses in the quarter was NIS 298 million, reflecting portfolio growth and economic uncertainty.

Capital adequacy remained well above regulatory requirements. The Common Equity Tier 1 (CET-1) capital ratio stood at 11.83%, exceeding the 10.23% regulatory minimum and the 11.0% internal target. Shareholders’ equity grew 8.1% year-over-year to NIS 67.1 billion, supported by organic capital generation. Liquidity metrics were also healthy, with the Liquidity Coverage Ratio (LCR) at 126% and Net Stable Funding Ratio (NSFR) at 114%, both above the 100% regulatory threshold.

What the Numbers Show

The divergence between the reported ROE of 15.0% and the adjusted ROE of 16.4% highlights the significant drag from the new special bank tax, which nearly doubled in total system-wide impact from 2025 to 2026. While operational performance improved — evidenced by the expansion in financing income and contraction in the cost-income ratio — the statutory tax burden absorbed a material portion of the pre-tax profit growth. This suggests that future profitability assessments must account for this elevated tax baseline, particularly as the bank targets an ROE range of 13%–14% for full-year 2026.

Outlook and Recent Developments

Looking ahead, Bank Hapoalim reaffirmed its financial targets for 2026–2027, projecting net profit in the range of NIS 8.5–9.5 billion for 2026 and NIS 9.5–10.5 billion for 2027. The bank expects credit portfolio growth of 8%–9% annually and plans to distribute 50%–60% of net profit through dividends and buybacks. Additionally, the bank is advancing its headquarters relocation plan, including the sale of the Rubinstein Towers in Tel Aviv, with expected pre-tax profits of NIS 800–900 million to be recognized from 2027 onward.