Mizrahi Tefahot reported its second quarter on 17 August. It is the fifth and last of the large banks to report on the quarter.
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The Quarter
| NIS millions | The quarter | A year ago | Change |
|---|---|---|---|
| Net interest income | 3,012 | 3,093 | -2.6% |
| Total non-interest income | 790 | 698 | 13.2% |
| of which fees | 596 | 590 | 1.0% |
| Operating and other expenses | 1,287 | 1,323 | -2.7% |
| of which salaries and related | 830 | 857 | -3.2% |
| Credit loss expense | 90 | 56 | 60.7% |
| Net profit to shareholders | 1,428 | 1,453 | -1.7% |
| Basic earnings per share, NIS | 5.49 | 5.60 | |
| Diluted earnings per share, NIS | 5.43 | 5.56 |
The Same Line, for the Fifth Time
Hapoalim reported, Leumi and FIBI after it, Discount on Thursday - and now Mizrahi. At all of them net interest income fell or froze, and at Mizrahi it fell 2.6%.
This is the line that rests on the spread between the rate the bank charges and the rate it pays, and when it falls at all five banks in the same quarter, the cause is not any particular bank but the rate environment.
And for the half the picture is identical: net interest income totalled NIS 5,705 million against NIS 5,892 a year ago, a fall of 3.2%, and net profit NIS 2,666 million against NIS 2,743 - a fall of 2.8%.
And What Mizrahi Did Differently
This is the point that separates it from the other four:
| NIS billions | 30.6.2026 | 30.6.2025 | Change |
|---|---|---|---|
| Total assets | 580.8 | 517.3 | 12.3% |
| Net credit to the public | 423.7 | 376.7 | 12.5% |
| Public deposits | 474.4 | 417.4 | 13.7% |
| Securities | 56.5 | 39.7 | 42.2% |
| Equity attributable to shareholders | 36.1 | 33.1 | 9.0% |
The spread eroded, and the bank increased the quantity. Credit to the public grew 12.5% over the year, and deposits 13.7%.
This is not a self-evident response. A bank watching its spread contract can choose to defend profitability and give up volume, or the reverse - grow faster than the rate of erosion. Mizrahi chose the second.
The result shows in the bottom line: profit fell only 1.7%, even though interest income fell 2.6%.
The Efficiency, and That Is a Strong Number
The efficiency ratio improved to 33.9% from 34.9%. For the half: 35.9% against 36.3%.
The efficiency ratio measures how much the bank spends to produce a shekel of income, and the lower it is the better. Operating expenses fell 2.7% in absolute terms, and salaries 3.2% - an actual cut, not slower growth.
And this happened while the balance sheet grew 12.3%. A bank that grows its credit book by an eighth and reduces its expenses at the same time produces that improvement from operating leverage itself.
And the Line That Needs Watching
The credit loss expense jumped from NIS 56 million to NIS 90 million - a rise of 61%.
In proportion to a credit book of NIS 423.7 billion this is still a small number, and the provision rate as a share of credit to the public actually fell to 0.85% from 1.06%. The two figures do not contradict: the first is the quarter's expense, the second is the accumulated stock of provisions relative to a book that grew.
What is worth following: the share of non-accruing credit or credit 90 days or more in arrears stands at 0.95% of credit to the public, against 1.07% a year ago. That is, portfolio quality did not deteriorate - the quarterly expense rose while the quality measures improved. The report does not explain the gap.
The Return and the Capital
| The quarter | A year ago | |
|---|---|---|
| Return on equity | 16.0% | 17.8% |
| Return on average assets | 1.01% | 1.14% |
| Common equity tier 1 ratio | 10.22% | 10.41% |
| Liquidity coverage ratio | 132% | 135% |
Return on equity fell by about 1.8 percentage points, consistent with equity that grew 9.0% while profit fell 1.7%.
And the tier 1 ratio fell to 10.22% from 10.41%. That is what happens when credit - the risk-weighted denominator - grows 12.5% while capital grows 9.0%. The bank paid a dividend of 238 agorot per share in the quarter, against 199 a year ago.
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
Five banks, the same top line, and five different responses - and that, to me, is the interesting point of this season.
Interest income fell at all of them. That is an environmental figure and none of them controls it. What they do control is what to do about it, and Mizrahi chose the most aggressive answer: grow the book 12.5% and absorb a lower spread on a larger base.
It is a choice with a bill attached. The tier 1 ratio fell to 10.22%, and that is not incidental
- credit growth consumes capital. A bank that keeps growing at this pace reaches a point where either growth slows, or the dividend shrinks, or capital is raised. None of the three is a problem today, and all three are a question of pace.
And what impressed me most was actually on the expense side. Cutting operating expenses 2.7% and salaries 3.2% while the balance sheet grows 12.3% is not routine management - it is a decision. An efficiency ratio of 33.9% is among the best we have seen this season.
And what I would check next quarter: whether the credit loss expense, up 61%, keeps rising while the portfolio quality measures improve. Those two directions cannot hold together indefinitely, and one of them will change.
(An important note: this is my personal opinion only, and nothing here is a recommendation to take any action.)
