Hapoalim, one of Israel's two largest banks, said on Monday it expects annual profit to rise by up to 25% this year and is pushing for regulators to allow it to raise dividend payouts as it reported an increase in earnings in 2024 after weathering military conflicts and a weak economy.
Hapoalim – which has a market share of around 30% – said made a net profit of 7.64 billion shekels ($2.12 billion) in 2024, up from 7.36 billion in 2023, helped by high interest rates, which increased financing income, and a drop in loan default provisions. Its return on equity, though, dipped to 13.8% from 15.0%.
Hapoalim's shares were up 4.4% in afternoon trading in Tel Aviv and have gained more than 10% so far in 2025.
The Bank of Israel has increased interest rates sharply since 2022 to battle inflation. This has boosted lenders' profits and raised dividend payouts, prompting public criticism that banks are cashing in while dragging their feet on putting up savings rates.
Hapoalim Chief Executive Yadin Antebi downplayed the criticism, saying Israeli banks pay higher interest to customers than those in the United States and Europe, while Hapoalim doesn't have a controlling shareholder "meaning all of our profits go back to the public."
The bank set a number of growth targets for 2025 and 2026, including net profit of between 8.5 billion and 9.5 billion shekels in each year, with return on equity of 14-15%. The bank also seeks profit distribution of at least 50% of net profit through dividends and share buybacks.
Hapoalim said it would distribute to shareholders 622 million shekels for the quarter, or 40% of net profit, the highest limit allowed by the Bank of Israel. Of that, 372 million shekels would be in a cash dividend and 250 million in the third tranche of a share buyback plan, Hapoalim said.
"We could have paid a lot more than that but the Bank of Israel is still very conservative with dividend payouts," Antebi told Reuters. "We have access to 5 billion shekels of capital, which gives us the opportunity to pay out more in the future… We believe it will be changed in the future."
Demands from the Bank of Israel
Banks want the Bank of Israel to allow them to pay out at least 50% of net profit in dividends and share buybacks.
The central bank indicated it was not considering a change in its dividend policy anytime soon. "Given the ongoing geopolitical uncertainty and its economic ramifications, it is essential for banks to manage their capital conservatively," it said in a statement to Reuters.
Antebi said that with 80% of its shareholders being Israeli pension funds and other institutions, higher dividends benefit the public.
Jefferies analyst Joseph Dickerson said Hapoalim "laid out compelling financial targets."
In the fourth quarter, Hapoalim earned 1.55 billion shekels, down 11.9% from the same period in 2023, with profit weighed down by a net 400 million shekels expense for employees who opted for early retirement as well as a negative inflation contribution.
Net interest income grew to 4.18 billion shekels from 3.75 billion, while its provision to protect against bad debts fell to 350 million shekels from 453 million.
The bank said credit growth was strong last year, growing 8.9% despite Israel's wars against terrorist groups Hamas and Hezbollah. There have since been ceasefire deals on both fronts.
"The business sector is continuing to develop even though Israel had a war," Antebi said.
