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Introduction & Market Context
Leumi reported strong financial results for the first quarter of 2025, maintaining consistent profitability despite ongoing economic challenges in Israel. The bank’s presentation, delivered on May 20, 2025, highlighted a net profit of NIS 2.4 billion and a return on equity (ROE) of 15.4%, demonstrating resilience in a moderately growing economic environment.
According to the bank’s macroeconomic overview, Israel’s economy is projected to grow by 1.9% in 2025 and 1.8% in 2026, outpacing the OECD average. Inflation is expected to remain at the higher end of the Bank of Israel’s target range at 3.0% for 2025, while unemployment is forecast to stay low at 3.1%.
As shown in the following chart of Israel’s economic indicators:
Quarterly Performance Highlights
Leumi delivered a net income of NIS 2,403 million for Q1 2025, compared to NIS 2,153 million in Q1 2024 (excluding one-time gains from real estate sales). This represents a 12% year-over-year increase, reflecting the bank’s strong operational performance.
The bank has maintained a consistently high ROE, which stood at 15.4% for Q1 2025. This continues a pattern of stable returns, with ROE ranging between 15.4% and 16.2% over the past five quarters, as illustrated in the following chart:
The bank’s comprehensive financial metrics show improvement across several key indicators compared to the previous year:
Following the earnings release, Leumi’s stock price increased by 3% to NIS 5,562, reflecting investor confidence in the bank’s performance. The stock is currently trading near its 52-week high of NIS 5,562, significantly above its 52-week low of NIS 2,867.
Detailed Financial Analysis
Leumi’s income and expenses breakdown reveals strong performance in core banking activities. Net interest income increased by 6.6% year-over-year to NIS 4,017 million in Q1 2025, up from NIS 3,767 million in Q1 2024. This growth was supported by an improved net interest margin (NIM) of 2.35%, compared to 2.22% in the same period last year.
The following chart details the bank’s income and expense components:
The improvement in net interest income and margin is further illustrated in this quarterly trend:
Fee income showed significant growth, increasing by 9.2% year-over-year to NIS 1,021 million in Q1 2025 from NIS 935 million in Q1 2024. This growth was driven by increases across multiple fee categories, particularly in financing transactions and securities activities.
As shown in the following fee income breakdown:
The bank’s cost-income ratio stood at 32.1% for Q1 2025, compared to 33.4% in Q1 2024 (excluding one-time gains), demonstrating Leumi’s continued focus on operational efficiency. According to the earnings report, Leumi maintains its position as the most efficient bank in its market.
Credit Quality and Loan Growth
Leumi reported exceptionally low credit loss expenses of 0.05% for Q1 2025, a significant improvement from 0.21% in Q1 2024. Specific provisions remained consistently low, reflecting the bank’s strong credit underwriting standards and risk management practices.
The following chart shows the trend in loan loss provisions:
Non-performing loans (NPLs) remained at a low level of 0.51% in Q1 2025, consistent with the 0.50% reported at the end of 2024. Total (EPA:TTEF) provisions stood at 1.45% of the loan portfolio, providing adequate coverage for potential credit losses.
As illustrated in this credit quality overview:
The bank continued to grow its loan portfolio responsibly, with total loans increasing by 1.6% quarter-over-quarter and 8.0% year-over-year to NIS 462.8 billion. Growth was particularly strong in mortgages (10.4% year-over-year) and corporate lending (10.0% year-over-year), as shown in the following chart:
Capital Position and Shareholder Returns
Leumi maintained a strong capital position with a Common Equity Tier 1 (CET1) ratio of 12.15% in Q1 2025, well above regulatory requirements. This solid capital base supports the bank’s growth strategy while enabling increased shareholder returns.
The bank announced plans to return NIS 1.0 billion of capital to shareholders based on Q1 2025 earnings, representing a 40% payout ratio. This includes a cash dividend of NIS 0.7 billion and a share buyback of NIS 0.2 billion. Management also indicated an intention to target a minimum 50% payout ratio in 2025-26, subject to Bank of Israel approval.
As shown in the following chart of capital returns:
"The bank continues to present consistent and strong financial performance with high ROE despite the ongoing economic uncertainty," said Hagib Ghorf, CFO, during the earnings call. He expressed optimism about future dividend distribution, stating, "We expect that when there will be a significant reduction of this uncertainty, the Bank of Israel will lift these limitations."
Forward-Looking Statements
Looking ahead, Leumi remains confident in its ability to sustain loan growth despite geopolitical challenges, with a focus on expanding its target market segments. The bank anticipates continued strong performance in net interest income, supported by its diversified loan portfolio and deposit base.
Management highlighted several investment strengths, including consistently high profitability, continued loan growth in target segments, excellent credit quality, operational efficiency, strong capital position, and increasing shareholder returns.
Key risks and challenges identified include ongoing geopolitical uncertainty, potential volatility in capital markets, and changes in the Israeli economic environment. However, the bank’s strong capital position and diversified business model provide resilience against these challenges.
With its solid financial foundation and strategic focus on core banking activities, Leumi appears well-positioned to navigate the economic environment while delivering value to shareholders through both growth and increased capital returns.
Full presentation:
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