Last week the Bank of Israel raised the interest rate for the eighth time in a row, and accordingly the mortgages became more expensive by hundreds of shekels, but despite this it seems that the Israeli public, who tends to complain about the cost of living, has not yet come to terms with the new economic environment. This contrast that continues even at the beginning of 2023 reveals that Israelis continue to increase consumption, and the financial institutions continue to profit.
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Based on the financial reports of the Max credit card company, which opened the annual report season of the financial entities in Israel, this trend is not expected to change in the coming months.
“There is a change in the market, the interest rate is rising and we are keeping an eye on what these changes will do to the private consumer and the small business,” says Ron Fainero, CEO of Max. will meet the repayments, ref.), and the rate of write-offs from the balance of the debt, are similar to previous years.”
Indeed, the reports show that in 2022 Max set aside NIS 77 million for credit losses, compared to NIS 50 million in the previous year. Apparently this is a significant increase, but it is mainly due to the fact that the credit card companies, like banks, must set aside 1.54% for each debt and each new credit. In the past year, Max recorded a significant increase in its credit activity – by 34% in consumer credit to approximately NIS 8.5 billion and 68% in business credit to approximately NIS 0.8 billion.
Reduce the space above the frame
At the same time, the increase in interest increased Max’s income from interest to NIS 555 million, a jump of 51% compared to the previous year. The interest rate for individuals rose to a double-digit rate of 10.2%, which is still expected to be the lowest among the three credit card companies.
The average interest rate on bank loans was 8.9% in January. Max stated that in light of the increase in the prime interest rate of 3.15% during the year 2022, the company chose to reduce to 5.45% the average interest margin above the prime, which stood at 5.6% at the end of 2021. For the business sector, the interest rate was 8%, here too the margin on the prime was reduced compared to the year before it.
At the same time, the company’s issuance turnover amounted to approximately NIS 113 billion, a growth of over 18%, and the issuance turnover of non-banking cards grew by approximately 34%. Thus, revenues from credit card operations amounted to NIS 1.27 billion, an increase of 22% from 2021.
Happy new year to the credit card industry
“2022 was a good year for the credit card industry,” says Fainero and details the factors: “Increase in consumption, in trips abroad, in demand for cards and credit, with an emphasis on credit for small and private businesses. An equally important parameter that directly affects the increase in credit card transactions is the government’s moves to reduce cash and the transition to digital means.”
The combination of these two trends brought Max’s net annual profit to NIS 248 million, compared to NIS 118 million in 2021, and NIS 178 million in 2018, Max’s last year under Bank Leumi.
This is a significant increase in profit in what is expected to be the last full year under the American fund Warburg Pincus, and under its representative in Israel – Yaron Bloch, who serves as Max’s chairman. This is because the fund is expected to complete the sale of Max to Clal Insurance in the coming days.