2024 may have ended nearly two months ago, but from the banks' perspective, it will only end in the coming few weeks after publication of the financial results for the year. During this period, banks are working on preparing their financial statements, and some banks have already begun to ask the Bank of Israel's Supervisor of Banks, Daniel Hahiashvili, if he will allow them to increase their dividend distribution, from a ceiling of 40% of profits towards 50%, as a result of the continued exceptional profitability they will present at the end of the year.
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According to estimates in the banking system, the five largest banks: Bank Leumi (TASE: LUMI), Bank Hapoalim (TASE: POLI), Mizrahi Tefahot Bank, Israel Discount Bank (TASE: DSCT) and First International Bank of Israel (TASE:FTIN1; FTIN5) will end the year with an aggregate net profit of about NIS 30 billion, up from an aggregate net profit of nearly NIS 23 billion in the first nine months of last year. A source in the banking system said, "Banks that are expected to present significant capital surpluses have begun to explore the Supervisor of Banks on his willingness to increase the ceiling. Apparently, he is reluctant to allow them to increase it."
The banks' desire to reward their shareholders, who ultimately constitute a significant portion of the public in Israel through their long-term savings, could reduce their capital to a level that regulators fear will raise their risk threshold beyond what is necessary. In the first nine months of last year, the reports of the five banks showed that high interest rates continue to benefit them. So does the high inflation environment, since a significant portion of the loans they make are also linked to the Consumer Price Index. The season of financial statements at banks is expected to begin this week, on Thursday, with the publication of the financial report by Mizrahi Tefahot Bank. Hapoalim (3.3), Leumi (4.3), Discount (11.3) and First International Bank (12.3) will follow.
The Bank of Israel responded: "During this period, when geopolitical uncertainty and its economic implications are still with us, it is important that banks manage their capital conservatively."
Published by Globes, Israel business news – en.globes.co.il – on February 24, 2025.
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