Bank Hapoalim reported its second quarter today, 11 August 2026.
Errors or inaccuracies are possible. Spotted something that looks wrong? Write to me and I will correct it.
The Quarter and the Half
| NIS millions | The quarter | A year ago | The half | A year ago |
|---|---|---|---|---|
| Net profit to shareholders | 2,488 | 2,542 | 4,612 | 4,966 |
| Net interest income | 4,825 | 4,796 | 9,060 | 9,071 |
| Financing profit, net | 5,434 | 5,293 | 9,825 | 9,893 |
| of which from interest | 1,778 | 1,649 | 3,053 | 3,064 |
Profit fell. By 2.1% in the quarter, and by 7.1% for the half.
And that happens while the balance sheet grows at a double-digit rate. That gap defines this report, and in effect the whole banking system at this point in the rate cycle.
The Headline Ratios
| The quarter | A year ago | The half | A year ago | |
|---|---|---|---|---|
| Return on equity | 15.0% | 16.7% | 14.0% | 16.5% |
| Return on average assets | 1.22% | 1.39% | 1.17% | 1.38% |
| Income to average assets | 3.24% | 3.52% | 3.06% | 3.38% |
| Net interest income to average assets | 2.37% | 2.62% | 2.29% | 2.53% |
| Fees to average assets | 0.56% | 0.63% | 0.57% | 0.61% |
| Efficiency ratio | 30.6% | 32.8% | 33.3% | 33.8% |
| Financing margin from current activity | 2.70% | 2.90% | 2.60% | 2.79% |
Return on equity fell from 16.7% to 15.0%. Still a very high return by international standards, but the direction is clear.
And the number that explains the decline is the financing margin: 2.70% against 2.90% a year ago.
That is 20 basis points of erosion, and it is the whole picture in one line.
A bank earns on the spread between what it charges on credit and what it pays on deposits. When the policy rate falls, that spread compresses - credit reprices downward faster than deposits do.
And it shows up across every profitability line relative to assets: net interest income fell from 2.62% to 2.37% of average assets, and fee income from 0.63% to 0.56%.
In other words: the bank manages more money, and earns less on each shekel it manages.
And the Other Side: the Balance Sheet Is Growing Fast
| NIS billions | 30.6.2026 | 30.6.2025 | Change |
|---|---|---|---|
| Net credit to the public | 536.2 | 469.1 | +14.3% |
| Public deposits | 618.1 | 576.9 | +7.1% |
| Total assets | 809.5 | 758.1 | +6.8% |
| Securities | 155.1 | 150.3 | +3.2% |
| Equity | 67.1 | 62.1 | +8.1% |
| Bonds and subordinated notes | 40.3 | 26.6 | +51.3% |
Credit to the public grew 14.3% in a year. That is a very strong pace.
And per the report, the split is uneven: business and commercial credit grew 9.9%, and housing credit 3.4%.
And two balance sheet lines worth placing side by side.
Credit grew 14.3%, and deposits grew 7.1%.
When credit grows faster than deposits, the bank has to find another funding source. Which is exactly what the last line shows: bonds and subordinated notes rose from NIS 26.6 billion to NIS 40.3 billion.
Capital markets funding is more expensive than retail deposits - and that in itself presses on the margin.
Credit Quality
| The quarter | A year ago | |
|---|---|---|
| Allowance for credit losses as a share of credit to the public | 1.65% | 1.74% |
| Non-accrual or 90 days or more past due | 0.53% | 0.53% |
| Net accounting write-off rate | 0.14% | 0.08% |
| Credit loss expense rate | 0.22% | 0.26% |
The picture here is mixed, and it should be read carefully.
What looks good: the problem credit rate is stable at 0.53%, the credit loss expense fell from 0.26% to 0.22%, and net problem credit risk fell to NIS 6.5 billion from NIS 7.1 billion.
And what to flag: the net accounting write-off rate in the quarter rose to 0.14% from 0.08% - close to a doubling. And credit not accruing interest income rose to NIS 2,745 million, from NIS 2,404 million a year ago.
In absolute terms this is still very low - on a NIS 536 billion book these are fractions of a percent. But when write-offs rise while provisioning falls, that is a line worth following next quarter.
Capital
| 30.6.2026 | 30.6.2025 | 31.12.2025 | |
|---|---|---|---|
| Common equity Tier 1 to risk components | 11.83% | 12.02% | 11.98% |
| Total capital to risk components | 14.81% | 15.09% | 15.27% |
| Leverage ratio | 7.45% | 7.48% | 7.52% |
All three capital ratios declined slightly.
And that is entirely logical and not a warning sign: when credit grows 14.3% and equity grows 8.1%, risk components grow faster than capital - so the ratio falls even while the bank is profitable. That is the price of growth.
And liquidity is stable: the liquidity coverage ratio stands at 126% and the net stable funding ratio at 114%.
Efficiency, and This Is the Positive in the Report
The efficiency ratio in the quarter improved to 30.6%, against 32.8% in the comparable quarter.
On this ratio, lower is better - it measures how much of each shekel of income is consumed by operating expenses.
And why that matters precisely now: in an environment where the margin is eroding, the only way to defend profitability is to lower the cost of running the bank. Hapoalim managed that, and at a relatively fast pace - two percentage points in a single quarter.
For the half as a whole the improvement is more modest - 33.3% against 33.8% - which means most of the improvement happened in the second quarter.
A Note on the Year-Ago Comparison
One figure matters for reading this correctly: full-year 2025 profit included a one-time gain of roughly NIS 380 million net after tax, from amounts received from insurers and officers in connection with a settlement of a derivative claim relating to the American tax investigation.
Neutralised full-year 2025 profit was therefore NIS 9,422 million, against the NIS 9,802 million reported.
In the quarter and half in front of us there is no such difference - reported and neutralised profit are identical, NIS 2,488 million and NIS 4,612 million respectively.
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
This is a report that is very easy to describe wrongly in either direction, so I want to be precise.
Anyone looking only at the profit line will say the bank weakened. Profit fell 7.1% for the half, return on equity fell from 16.5% to 14.0%, and every capital ratio declined. And anyone looking only at the balance sheet will say the opposite: credit up 14.3%, a balance sheet past NIS 809 billion, and equity up 8.1%.
Both describe the same thing: a bank selling more at a lower price.
And that is not a management failure - it is the mechanics of a rate cycle. When the policy rate falls, credit reprices downward before deposits do, and the margin compresses. Twenty basis points on a NIS 536 billion book is a great deal of money. That is the entire explanation for the profit decline.
And what I actually respect in this report is the response: the efficiency ratio. A fall from 32.8% to 30.6% in a single quarter is a fast managerial reaction to a changed reality. A bank that sees its margin eroding and offsets part of it on costs is doing exactly the right thing.
What does bother me, though not dramatically, is a combination of two lines: credit growing 14.3%, and accounting write-offs rising from 0.08% to 0.14%. Rapid credit growth always looks excellent in the year it happens, and its price arrives two years later. I am not saying there is a problem here - the absolute figures are still excellent and the problem credit rate is stable. I am saying that is the line I will read first next quarter.
And what I will watch is one question: when the margin stabilises. As long as it keeps falling, profit will keep falling even as the book grows. The moment it stops compressing, all this credit growth turns from partial compensation into a real engine - and then NIS 536 billion of book works for the bank rather than against it.
