This article first appeared on GuruFocus .
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Net Income (Q2 2026):Exceeded ILS2.8 billion, the highest quarterly net income ever recorded by an Israeli bank.
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Net Income (H1 2026):Approximately ILS5.2 billion.
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ROE (Q2 2026):16.3%; 17.9% excluding the special Israeli bank tax.
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ROE (H1 2026):14.9%.
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Efficiency Ratio (Q2 2026):24.7%, a record level for the Israeli banking system.
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Efficiency Ratio (H1 2026):26.7%.
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Total Revenues (Q2 2026):ILS6.6 billion, a 10.1% increase year-over-year.
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Net Interest Income (Q2 2026):ILS4.6 billion.
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Net Interest Margin (NIM, Q2 2026):1.9%, excluding CPI effect.
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Non-Interest Income (Q2 2026):Approximately ILS1 billion, up from ILS0.4 billion in Q2 2025.
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Total Expenses (Q2 2026):ILS1.6 billion, flat year-over-year.
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Pre-Provision Net Revenue (Q2 2026):ILS5 billion, up 13.4% year-over-year.
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Credit Portfolio Growth (Q2 2026):Grew 3.4%, adding ILS19 billion.
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Credit Portfolio Growth (H1 2026):Grew 9%, already reaching the full-year target of 8%-10%.
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Corporate Segment Credit Growth (H1 2026):Increased by 13%.
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NPL Ratio:0.45%.
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Troubled Debt Ratio:1.11% of gross loans.
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Total Credit Loss Expenses:0.2% of gross loans.
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Core Tier 1 Ratio:11.65%.
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Total Capital Ratio:14.43%.
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Dividend and Buyback:Announced a total payout of ILS1.4 billion, representing 50% of quarterly net income and a dividend yield of 5.5%.
Release Date: August 12, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Record quarterly net income of ILS2.8 billion, the highest ever for an Israeli bank, with ROE of 16.3% (17.9% excluding special tax).
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Exceptional efficiency ratio of 24.7% in Q2, the best in Israeli banking history and among the best globally, driven by AI and technology adoption.
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Strong credit growth of 9% in H1 2026, already meeting the full-year target, with robust expansion in strategic segments like infrastructure and corporate.
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High asset quality with NPL ratio at just 0.45% and 10 consecutive quarters of income from specific provisions, reflecting conservative underwriting.
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Solid capital position with ILS8.5 billion excess capital above regulatory targets, plus unrealized gains from Valley National Bank investment, and a shareholder return of ILS1.4 billion (5.5% yield).
Negative Points
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Net income impacted by the special Israeli tax on banks, which reduced ROE by 1.6 percentage points in Q2.
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Net interest margin (NIM) declined to 1.9% from 1.95% in Q1, due to lower interest rates and compression in credit and deposit spreads.
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CET1 ratio slightly decreased to 11.65% from 11.74% in the previous quarter, due to higher activity and rapid loan growth.
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Geopolitical uncertainty remains high, with potential risks to economic recovery and credit quality from the ongoing war.
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Fee income growth was partly offset by benefits granted to customers under the Bank of Israel program, limiting overall fee growth to 2.8% year-over-year.
Q & A Highlights
Q: Bank Leumi is generating mid-teen returns, carries excess capital, and has already delivered its annual loan growth target in the first half. Looking ahead, where would you prefer incremental capital to be deployed, supporting faster growth or enhancing shareholder distributions? What factors will ultimately determine that balance? A: Hanan Friedman (President and CEO): We published our targets at the beginning of the year of loan growth of between 8% to 10%, but we always said that we will try to pick opportunities in the Israeli market, mainly surrounding project finance. For us, ROE is before growth. We are first of all players of ROE and careful underwriting that is meeting our conservative credit policy, and then we look at growth. Regarding our excess capital, since we still believe that it might be that later this year, we will have additional opportunities that we will be able to pick, we believe that we should, at the meantime, keep the excess capital that we have. We distributed this quarter 50% of the net profit, and we believe this is the right balance in order to give us the opportunity to continue with healthy growth, focused on our ROE ambitions.
Q: Corporate lending growth remains exceptionally strong. How would you characterize the competitive environment today? Are you seeing any signs of increased pricing pressure, or does the market remain as disciplined as it has been in the recent years? A: Hanan Friedman (President and CEO): We have uniqueness experience in this business. We have capabilities that I believe are better than the other players in the market, and we are keen to take advantage of it and to have the right ROE from this business. In Israel, in the last years and in the years to come, there is a need for massive investments in infrastructure projects. We will continue to make our decisions based on ROE and high standards of quality of our loan book before volume.
Q: We see that your growth is already, after half a year, pretty much at your full-year targets. How do you see the second half of the year? Do you expect to be updating guidance anytime soon? How should we think where that growth is going to come from? A: Hanan Friedman (President and CEO): We believe that we will be able to continue with rapid growth that will meet our criteria. I cannot assure you that it will be at the same level, because some of the large project finance could take time, and there is a time difference between entering into the deal and granting the loans in such a large project. We know what we already have in the pipeline that will support our growth in the years to come, and we know some of the governmental plans regarding infrastructure. All of that together gives us the confidence that it will continue to be a material part of our loan growth.
Q: How sustainable is the positive trend in specific provisions, given that you have reported net recoveries for the past 10 quarters? Do you expect any pressure to emerge in the coming months as a result of the ongoing war? How should we think about your cost of risk and NPL ratios over the coming quarters into year and 2027? A: Hanan Friedman (President and CEO): Credit quality is totally related to the economy of the state of Israel. The Israeli economy is resilient, even three years into the war, and performed very well, much better than the expectations of the rating companies at the beginning of the war. We record quarter after quarter a positive outcome from specific provisions, which reflects the quality of our loan book and the high standards of our underwriting. We do not have any reason or any flag that caused us to change our mind regarding the quality of our loan book. We are well provisioned, and the ratios between provision and NPL are very high, reflecting our conservative approach. Therefore, we strongly believe that we will be able to continue running our portfolio in a very low environment of credit losses. Hagit Argov (CFO) added that all the numbers of credit quality are very low for a long time, and the underwriting policy of Bank Leumi is very conservative, and we believe that we can keep it going forward.
Q: Could you please elaborate on the drivers for the decline in CET1 ratio, and how do you plan to boost it further to historic levels? A: Hanan Friedman (President and CEO): Our CET1 ratio is much greater than the regulatory requirements. According to Bank of Israel regulation, the RWA calculation in Israel is much more conservative than in Europe or in the States. We publish once a year what would have been our CET1 ratio if our assets were calculated in line with the IRB regulation, and the results are much higher than the CET1 that we record in our financial statements. We grew our loan book in the first half of the year in a very nice way, and we distributed a dividend above our minimum policy because we feel that this is the right balance between shareholders return and what we need for occasions that we will have many opportunities to pick. Therefore, we feel totally comfortable with the current level of CET1.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
