Hapoalim profits rise 25% in Q1 as lending surges

Bank Hapoalim, one of Israel’s two largest financial institutions, reported a robust first-quarter net profit of 2.42 billion shekels ($680.6 million), a significant rise from 1.94 billion shekels a year earlier. 

The strong performance was driven by surging net interest income and double-digit credit growth, even as the national economy slows amid the ongoing war in Gaza.

The bank’s return on equity (ROE) climbed to 16.4%, compared to 14.6% in Q1 2024, signaling efficient capital utilization despite regional instability.

Net interest income increased to 4.28 billion shekels, up from 3.81 billion, as the bank benefited from higher interest rates set by the Bank of Israel since 2022 in an effort to contain inflation.

However, Hapoalim also recorded a notable increase in its credit loss provisions, allocating 262 million shekels to guard against potential defaults, compared to a positive 14 million shekels provision income in the same period last year. 

The bank attributed the increase to an 11% expansion of its credit portfolio and the volatile political, economic, and security climate.

Hapoalim announced it would return 970 million shekels (40% of net profit) to shareholders — including a 720 million shekel cash dividend and 250 million shekels through its ongoing share buyback program.

Earlier this year, the bank had expressed a desire to increase shareholder payouts to at least 50% of net profit, pending regulatory approval. However, Israel’s banking regulator has halted such plans, citing economic uncertainty stemming from the conflict in Gaza and urging banks to bolster their capital buffers.

Public Scrutiny and Market Performance

The Bank of Israel’s rate hikes have benefited lenders like Hapoalim by expanding their margins, but have also drawn public criticism over lagging interest rates on savings accounts. Meanwhile, the bank's Tier 1 capital ratio slipped slightly to 11.74% at the end of March, from 11.80% at year-end 2024.

Despite the macroeconomic and geopolitical pressures, Hapoalim’s stock has gained 26.5% in 2025, reflecting investor confidence in the bank’s fundamentals and profitability.

Hapoalim is the first major Israeli bank to report earnings this quarter, with Israel Discount Bank and others expected to follow. Discount Bank has also stated its intention to increase shareholder distributions to 50% of profit once permitted.

($1 = 3.5556 shekels)