Bank Hapoalim: Strong Q2 Growth, but Housing Clouds and Special Tax Temper the Outlook
ROE of 15% and double-digit credit growth mask rising watch items—special bank tax drag and a build-up of unsold apartments.
POLI.TA · Earnings Call · 2026-08-11
Strong quarter, but the war backdrop persists
Bank Hapoalim delivered a robust Q2 2026, with ROE of 15% (16.4% excluding the special bank tax) and net profit of ILS 2.5 billion, up 17.1% quarter-on-quarter. Credit growth was broad-based: 3.3% in the quarter, 6.6% year-to-date, and a striking 14.3% year-over-year. CEO Ram Gev said, “we delivered an excellent second quarter,” — Ram Gev, CEO · 2026-08-11 and highlighted the “3.3% credit growth or 6.6% since the beginning of the year.” — Ram Gev, CEO · 2026-08-11 The resilience of the Israeli economy, despite nearly three years of conflict, continues to underpin the bank's performance. Financing income was boosted by a high CPI contribution of ILS 431 million, lifting the financial margin to 2.70% from 2.49% in Q1. This tailwind, however, may not persist as the Bank of Israel is expected to cut rates further. Management acknowledged the pressure from lower interest rates and competitive pricing, but emphasized their commitment to maintaining the highest NIM in the sector. The credit portfolio remains well-diversified across retail, mortgages, and corporate, contributing to the strength.Cost discipline and efficiency gains
A standout in the quarter was expense control. Total expenses declined 4.4% year-over-year, with salary expenses down 7.3% as performance-based bonuses normalized. The cost-to-income ratio improved to 30.6%, a level that supports profitability even as interest rates fall. In the Q&A, Ram Gev noted: “Expenses is an important item for us and expenses declined by 4.4% versus the same quarter last year.” — Ram Gev, CEO · 2026-08-11 The bank continues to benefit from its early retirement program, which is expected to deliver ~ILS 300 million in annual savings, and is actively exploring AI-driven efficiency initiatives across its technology division.Capital strength and provisioning conservatism
Despite growth and the war, Hapoalim maintains a strong capital position. CET1 ratio stands at 11.83% versus an internal target of 11%. The bank continues to return capital to shareholders with a 50% payout ratio, distributing ILS 1.2 billion in dividends and buybacks. On credit quality, the cost of risk was 0.22% in the quarter, reflecting ongoing collective provisioning as the bank remains cautious. Special bank tax continues to drag ROE, but management sees it as manageable and factored into guidance. The bank's conservative provisioning stance is well-documented. In the prior quarter call, Yadin Antebi stated: “We thought that 2025 is a year that we should be very conservative in terms of provisions.” — Yadin Antebi, CEO · 2026-03-06 That approach persists, with the bank holding the highest allowance-to-credit ratio in the sector, providing a buffer against potential deterioration. On the capital target, Ram Gev explained in the November 2025 call: “Bank Hapoalim's Board of Directors has decided, like you mentioned, to set the minimum internal capital target at 11%.” — Ram Gev, Executive (likely CEO or CFO) · 2025-11-20 This target remains unchanged.A new watch item: unsold apartments
A fresh theme emerged in the Q&A: the housing market. Chief Economist Victor Bahar acknowledged a rise in unsold apartments, but downplayed the risk.This unsold apartments theme is a potential watch item for the bank's mortgage book. Management remains cautiously optimistic, expecting a rate cut and political stability to bring buyers back, but a prolonged slowdown could pressure asset quality and growth. Overall, Bank Hapoalim delivered a solid quarter, but the combination of rate cuts, a cooling housing market, and the lingering special bank tax means the second half will require careful management. The guidance for 2026 (net profit of ILS 8.5-9.5 billion, ROE of 13-14%) remains intact, but execution will be key.We see that some accumulation of stock of unsold apartments. Well, the question is whether we are concerned or not, I think that the level of stock is not so high compared to the demographic trends in Israel.