Earnings Call: Q1 2026

May 19, 2026

Summary

Q1 net profit was ILS 1,238 million and ROE was 14.1%; excluding the special tax and client relief, ROE would have been 16.3%. Credit grew 13.5% from Q1 2025 to date, and 50% of Q1 profits will be distributed as dividends.

Ladies and gentlemen, thank you for standing by. Welcome to the Mizrahi Tefahot Bank Ltd First Quarter 2026 business results conference call. All participants are at present in a listen-only mode. Following management's formal presentation, instructions will be given for the Q&A session. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded May 19, 2026. With us on the line today are Mr. Adi Shachaf, CFO, and Mr. Menahem Aviv, Chief Accountant. We would like to draw your attention to slide number one of the financial statement for the first quarter 2026 presentation, which includes general comments regarding legal responsibility, including debt. The information contained in the presentation constitute information from the bank's 2026 quarterly reports and/or immediate reports, as well as the periodic, quarterly, and annual reports and/or immediate reports published by the bank in previous years. Accordingly, the information contained in the presentation is only partial, is not exhaustive, and does not include the full details regarding the bank and its operation or regarding the risk factors involved in its activity, and certainly does not replace the information included in the periodic annual and/or quarterly or immediate reports published by the bank. In order to receive the full picture regarding the bank's 2026 quarterly and annual reports, the aforesaid reports should be pursued fully as published to the public. The bank's results in practice may be significantly different from those included in the forecasting information as a result of a large number of factors, including inter alia, changes in the domestic and global equity markets, macroeconomic changes, geopolitical changes, legislation and regulation changes, and other changes that are not under the bank's control, which may lead to the estimations not realizing and/or to changes in the business plans. The forecasting information may change subject to risk and uncertainty due to being based on the management's estimations regarding future events, which include, inter alia, global and local economic development forecasts, particularly regarding the economic situation in the market, including the effect of macroeconomic and geopolitical conditions, expectations for changes and developments in the currency and equity markets, forecasts related to other various factors affecting exposure to financial risks, forecasts with respect to changes to borrowers' financial strength, public preferences, changes in legislation and the provisions of regulators, competitors' behavior, the status of the bank's perceptions, technological development, and human resources development. Mr. Shachaf, would you like to begin? Yes, thank you very much. Welcome all to the Mizrahi Tefahot first quarter 2026 analyst call. As you all know, the last two and a half years were very unusual for Israel. From the first day of the war, the bank has taken a pro client approach, trying to offer immediate relief to its clients beyond the mandatory relief plan of the Bank of Israel, while adapting our experience and best practice to the current situation. For the bank, I would like to highlight a couple of points. First of all, I think it is very noticeable that the results have been reached despite the special tax Israeli banks are paying in 2026 and despite the extensive Bank of Israel client relief outline. If we exclude these items, the return on equity would be 16.3%. The first quarter results have been reached also despite a 0.5% lower interest rate and the negative CPI, with an offset vector coming from the portfolio growth. Credit growth from Q1 2025 to date was around 13.5%. This growth is across the board along most of the asset classes, including mortgages, corporate, and middle market, and is part of our strategic plan. We think that our credit metrics reflect a balanced credit portfolio with adequate risk management. As you can see, provisioning was relatively standard for this period. CPI contribution to financing revenues is traditionally low in Q1, and that was also the case this time. We are still missing one last CPI reading for the current quarter, but given the last two CPI figures, it is reasonable to assume that we will have a positive Q2 in that respect after the last two quarters gave negative CPI contribution. On top of the credit growth, we also witnessed a healthy growth in commissions. Commissions grew by around 14% annualized in the last quarter. We think that the net profit and the return on equity reflects the strong balance sheet and the good efficiency ratio. On the expense side, you can see the effective cost control that enable us to run the business in an efficient way. As always, salaries are also affected from variable remuneration related to the bank's results. Demand for mortgages is healthy, and we continue to follow our strategy to retain our market share in the market. During the last quarters, we continued to build the portfolio for the expected rate reduction. On the regulatory arena, there were three important developments. The first one is the 2026 special taxation on banks started this quarter, which we already discussed. The second one is the decision of the antitrust authority that the big banks in Israel are considered a concentration group. We are still learning the decision and its potential impact, also with respect to similar steps made by the Supervisor of Banks. The third one is the U.S. banks' Basel IV implementation outline, which we find positive. We think that it is reasonable to assume that today's balance sheet growth will materialize in the coming quarters, and we do expect to see further responsible credit growth in coming quarters. We will distribute 50% of Q1 profits as dividends. To conclude, our key takeaways for the quarter are as follows. Strong financial results despite extra tax, client relief outline, geopolitical environment, negative CPI, and lower interest rates. Significant credit growth across all segments. Solid balance sheet mix with credit quality metrics continues to be healthy. Effective expense base control. Healthy commission growth. As I was saying, 50% dividend distribution. All in all, I think we are following our effective path and accommodating to the new environment. Thank you very much for your attention. With that, I leave you with the hands of Mr. Rami Raviv, our Chief Accountant. Thank you, Mr. Shachaf. I will review the main figures in the financial statements. The net profit in Q1 2026 reached 1,238 million shekels, compared with 1,290 million shekels in Q1 2025. Return on equity in Q1 2026 reached 14.1%. The equity amounted ILS 35.2 billion. Total revenues in Q1 reached ILS 3,483 million. Financial revenues from current operations in Q1 reached ILS 2,769 million. The ratio of provisions loans in Q1 2026 reached 0.03%. Operating and other expenses in Q1 total ILS 1,328 million. The cost-to-income ratio reached 38.1%. The ratio of Tier 1 capital to risk element reached 10.17%, and the total ratio reached 13.02%. Thank you very much. I think we can go to Q&A now. Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press star one. If you wish to cancel your request, please press star two. If you are using speaker equipment, kindly lift the handset before pressing the numbers. Your questions will be pulled in the order they are received. Please stand by. We will be pull for your questions. The first question is from David Taranto of Bank of America. Please go ahead. Good afternoon. Thank you for the opportunity. I have one question, please. Your strategic plan last year set out ambitious market share targets in the business lending, and you have been delivering to date. In a high growth environment like today, pursuing market share also implies maintaining relatively high absolute growth rates. How are you thinking about the sustainability of this, and is there any shift in focus towards balancing growth with profitability and risk considerations? Thank you. As always, our first priority is the return on equity. We do not want to grow just for the sake of growing, but rather, as long as we can grow while maintaining our goals on the profitability and return on equity. Having said that, I remind all of us that the market shares on the plan are for the end of the plan. We were able to grow very nicely on credit since the beginning of the new strategic plan, double digits. Of course, other competitors also grew the books, but we are keeping with our path, again, growing while reaching our, hopefully, return on equity targets. Because again, we would not like just to grow for the sake of growing. Okay, that is clear. Thank you very much. There are no further questions at this time. This concludes the Mizrahi Tefahot Bank Ltd. first quarter 2026 business results conference call. Thank you for your participation. You may go ahead and disconnect.