Earnings Call: Q3 2025

Nov 18, 2025

Summary

Q3 net profit was ILS 1.483bn, ROE was 17.6% and credit growth was broad-based. A 50% dividend balances capital returns with continued lending growth; Q4 CPI contribution and credit-growth pace are expected to moderate.

Ladies and gentlemen, thank you for standing by. Welcome to the Mizrahi Tefahot Bank Q3 2025 business results conference call. All participants are present in listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. For operator assistance during the conference, please press star 0. As a reminder, this conference is being recorded November 18, 2025. 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 1 of the financial statement for the Q3 2025 presentation, which includes general comments regarding legal responsibility, including that the information contained in the presentation constitutes information from the bank's 2025 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 exhausted, and does not include the full details regarding the bank and its operations, 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 2025 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 plan. The forecasting information may change subject to risks and uncertainties due to being based on the management's estimation regarding future events, which include, inter alia, global and local economic development forecasts, particularly regarding the economic situation in the market, including the effects 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 provisions of regulators, competitors' behavior, the status of the bank's perception, technology developments, and human resources developments. Mr. Shahak, would you like to begin? Thank you all, and welcome to the Mizrahi Tefahot Q3 2025 analyst call. As you all know, the last two 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, and we adapted the COVID experience and best practice to the current situation. For the bank, it is much more boring. As you can see from the report and the results, without any material one-off. I think the most conspicuous item in this report is the very strong credit growth, which grows across the board along the most of the assets classes, including mortgages, corporates, and middle market, and is part of our strategic plan. It seems like it is not always linear. Many of the deals we were working on materialized in Q3, so it would be reasonable to assume that the work on front-loadings and growth rate in Q4 would be lower. This growth should help us to create a nice starting point for 2026. We think that our credit metrics reflects the bank's credit portfolio with adequate risk management. You can see provisioning was relatively standard for this period. For the other items, please let me use this call to further highlight a couple of points. CPI contribution to financing revenue is traditionally high in Q3, and that was also the case this time. CPI contribution in Q4 is, of course, expected to be lower. The net profit and the return on equity reflects the strong balance sheet and the good efficiency ratio. Our cost-income ratio for the quarter is below 35% and in line with our strategic plan. On the expense side, you can see the continuation of 2024 being the notch down compared to 2023 levels. As always, salaries are also affected from variable remuneration related to the bank's results. It is also very noticeable that the results have been reached despite the relative extra tax Israeli banks are paying in 2025 and despite the extensive Bank of Israel trying to lift outlines. Our implementation of the outline is targeting more financing, interesting or saving benefits to clients and less operational benefits. One can easily estimate the impact of these two items on the results. Liquidity is very robust, with high share of core deposits and capital ratios are in tandem with the profitability and growth. Demand for mortgages is healthy, and we continue to follow our strategy to retain our market share in the market. 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 Q3 profits as dividends. All in all, I think we are following our boring yet effective path and accommodating to the new environment. Thank you very much for your attention, and with that, I leave you with the hands of Mr. Menahem Aviv, our chief accountant. Thank you, Mr. Shahak. Let's review. Overview, the main figures in the financial statements. The net profit in Q3 2025 reached ILS 1,483,000,000. The net profit in the first nine months of 2025 reached ILS 4,226,000,000. The return on equity in Q3 reached 17.6%, and in the first nine months of 2025, reached 17.2%. The equity amounted ILS 34 billion. The cost-income ratio reached in Q3 2025, 34.2%. The financing revenues from current operations in Q3 reached ILS 2,822,000. The total revenues in Q3 reached ILS 3,830,000. Operating and other expenses totaled to ILS 1,310,000. The ratio of provisions to loans in Q3 reached 0.04%. The CET1 ratio reached 10.14%, and the total ratio reached 13.03%. I think, we could go now to Q&A, thank you, Tavy. 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 while we pull for your questions. The first question is from Tavy Rosner of Barclays. Please go ahead. Good afternoon. Thank you for the presentation. Just a couple of short questions, if I may. I saw the announcements from Bank of Israel earlier this week, allowing banks to distribute higher capital as long as it meets their capital requirements. What is your take about the announcement? Do you feel that there is room to distribute more, or are you comfortable with the current level for the time being? Thanks, Tavy. We are comfortable with the current level. As you can see, we use this capital for our growth and credit growth, and we think that, for example, in this quarter, a 50% dividend alongside a return on equity of 17.6% reflects the good mix and balance between these two. We think that we would keep on with our strategic plan and grow credit and with this capital. Got it. Thanks for that. On the business side, on the mortgage aspect now, do you feel any change to the competitive dynamics and other banks and institutions competing actively on prices or how to rethink about mortgages in the near term? We are not allowed to refer to prices, but we see a very competitive market on the mortgage arena for many, many quarters. Our strategy is to retain our market share, and we are able to do it despite the heavy competition. Okay, got that. Just a housekeeping one. How should we think of expense growth in the next couple of quarters? Do you feel like mid-single digit type of growth or are you expecting to kind of lower it at some point? Can you please repeat it, Tavi? Could not hear you. Yeah, just about the expenses in general, salaries, and so on. Should we expect mid-single digit growth, through the cycle as like a normal run rate? Yes. Okay. That is all from me. Thank you for the presentation. Thanks. Thank you. There are no further questions at this time. This concludes the Mizrahi Tefahot Bank Ltd. third quarter 2025 business results conference call. Thank you for your participation. You may go ahead and disconnect.