Q2 2026 Mizrahi Tefahot Bank Ltd Earnings Call
Speaker #1: A business results conference call. All participants are at present in a listen-only mode. Following management's formal presentation, instructions will be given for the question-and-answer session.
Speaker #1: For operator assistance during the conference, please press *0. As a reminder, this conference is being recorded. August 17, 2026. With us on the line today are Mr. Adi Shachaf, CFO, and Mr. Menahem Aviv, Chief Accountant.
Speaker #1: We would like to draw your attention to slide number 1 of the financial statement for the second quarter 2026 presentation, which includes general comments regarding legal responsibility, including debt.
Speaker #1: The information contained in the presentation constitutes information from the bank's 2026 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.
Speaker #1: Accordingly, the information contained in the presentation is only partial, is not exhaustive, and does not include the full details regarding the bank and its operation 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.
Speaker #1: In order to receive the full picture regarding the bank's 2026 quarterly and annual reports, the foresight reports should be pursued fully, as published to the public.
Speaker #1: 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-area changes in the domestic and global equity market, 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.
Speaker #1: The forecasting information may change subject to risk and uncertainty, due to being based on management's estimations regarding future events which include inter-area, global, and local economic development forecasts particularly regarding the economic situation in the market, including the effect of macroeconomic and geopolitical conditions, expectations for changes and development 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 the provisions of regulators, competitors' behavior, the status of the bank's perception technological development, and human resources development.
Speaker #1: Mr. Shachaf, would you like to begin?
Speaker #2: Thank you very much. Welcome all to the Mizrahi Tefahot second quarter 2026 analyst call. As you all know, the last 2 and a half 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.
Speaker #2: While adapting our experience and best practice to the current situation, as for the bank, it is much more boring and I would like to use this call to highlight a couple of points.
Speaker #2: First of all, I think it is very noticeable that the results have been reached despite the special tax Israeli banks are paying in 2026, despite the extensive Bank of Israel client relief outlined if we exclude these items, the return on equity would be 17.7%.
Speaker #2: Q2 results have been reached also despite a lower interest rate, with an offset factor coming from the portfolio's growth and the continuous work on the expense side.
Speaker #2: Credit growth from Q2 2025 to date was around 12.5%. This growth is across the board without any material one-offs, and along most of the asset classes, including mortgages, corporates, and middle market, and is part of our strategic plan.
Speaker #2: We think that our credit metrics reflect a balanced credit portfolio with adequate risk management. As you can see, provisioning was relatively standard for this period, and we still hold reserves due to the economical and geopolitical uncertainty.
Speaker #2: CPI contribution to financing revenues is traditionally high in Q2, and that was also the case this time. We are still missing one last CPI reading for the coming quarter, but given the last two CPI figures, it is reasonable to assume that we would have a positive Q3 in that respect.
Speaker #2: On top of the credit growth, we also witnessed a healthy growth in commissions and deposits. We think that the net profit and the return on equity reflect the strong balance sheet and the good efficiency ratio.
Speaker #2: On the expense side, you can see the effective cost control that enabled us to run the business in an efficient way. And as always, salaries are also affected from variable remuneration related to the bank's results.
Speaker #2: Demand for mortgages is healthy, and we continue to follow our strategy to retain our market share in the market. During the last quarters, we continue to build the portfolio for the expected rate reductions.
Speaker #2: We think that it is reasonable to assume that today's balance sheet growth would materialize in the coming quarters, and we do expect to see further responsible credit growth in coming quarters.
Speaker #2: We will distribute 50% of Q1 profits as dividends, maybe to conclude our key takeaways for the quarter are as follows. Strong financial results despite extra tax, client relief outlined, geopolitical environment, and lower interest rates.
Speaker #2: Significant credit growth across all segments without material one-offs. Solid balance sheet mix with credit quality metrics continues to be healthy. Effective expense side control, healthy commission growth, 50% dividend distribution.
Speaker #2: All in all, I think we are following our effective path and the common accommodating to the new environment. I would like to thank you very much for your attention, and with that, I leave you with the hands of Mr. Menno Aviv, our Chief Accountant.
Speaker #3: Thank you, Mr. Shachaf. I will review the main figures in the financial statements as of June 30, 2026. Net profit in Q2 reached 1 billion 428 million shekels.
Speaker #3: Net profit in H1 2026 reached 2 billion 666 million shekels. Return on equity in H1 reached 15%, and in Q2 2026 reached 16%. The equity amounted 36.1 billion shekels.
Speaker #3: Cost income ratio in Q2 2026 reached 33.9%. Financing revenues from current operations in Q2 2026 reached 2 billion 770 million shekels. Total revenues in Q2 reached 3 billion 802 million shekels.
Speaker #3: Operating and other expenses in Q2 totaled 1 billion 287 million shekels. The ratio of provisions to loans in Q2 reached 0.08%. The ratio of T1 reached 10.22%, and the total ratio reached 20.912.98%.
Speaker #2: Thank you, Mr. Aviv. And now we can go to Q&A.
Speaker #1: Thank you. Ladies and gentlemen, at this time we will begin the question and answer session. If you have a question, please press star 1.
Speaker #1: If you wish to cancel your request, please press star 2. If you are using speaker equipment, kindly lift the handset before pressing the number.
Speaker #1: Your questions will be pulled in the order they are received. Please stand by while we pull for your question. I repeat, if you have a question, please press star 1.
Speaker #1: If you wish to cancel your request, please press star 2. Please stand by while we pull for questions. There are no further questions at this time.
Speaker #1: This concludes or we have a question. The first question is from David Kaplan of Sagot. Please go ahead.
Speaker #4: Hi, sorry about that. I had a technical difficulty there. A quick question just on the regulation. I saw a number of the banks, including yourselves, put out a response to the competition regulator today.
Speaker #4: Regarding calling the group of the banks whatever it is that they termed it. Can you talk a little bit about what happened there and what the banks are examining?
Speaker #2: So, of course, I cannot speak on behalf of the bank, but just ourselves. As you can imagine, we cannot elaborate a lot because this is in process, and we'll let the court do its work.
Speaker #2: Obviously, we think that there are some aspects that need to be changed, but we rather let the court decide in that respect. Thanks.
Speaker #4: Okay. Great. And then just one question about the loan growth going forward. I mean, it's been a very strong first half of the year, for the banking system and for Mizrahi as well.
Speaker #4: With kind of the mix of business shifting away from what we've seen last couple of years to new sectors, how do you see that going forward?
Speaker #4: Do you see mortgages strengthening once again, or do you see the focus continuing to remain in financial services and in the corporate sector? Thanks.
Speaker #4: And then that's it for me.
Speaker #2: Thanks.
Speaker #3: So we assume that we will grow on the mortgage with the market, so we don't have plans to increase our market share in mortgages, but rather grow with the market.
Speaker #3: On the credit for businesses, as you can see, we are growing. So in percentage term, our growth is higher in corporates because we're starting from a lower point.
Speaker #3: But for the mix as a whole, currently, we don't see a reason why it shouldn't continue with the trend we've witnessed in the last couple of quarters.
Speaker #4: Okay. Great. Thanks very much.
Speaker #1: There are no further questions at this time. This concludes the Mizrahi Tefahot Bank LTD second quarter 2026 business results conference call. Thank you for your participation.
