Isracard announced to the stock exchange this morning (Wed) that the company’s board of directors approved an efficiency plan, within which the company anticipates that the implementation of the plan will lead to the layoffs of about 250 jobs, which constitute about 12% of the total number of jobs. The company explained that as part of the streamlining, changes will be made to organizational structures, streamlining processes, reducing units and other adjustments.
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In Isracard’s estimation, the company is expected to record a one-time expense in respect of retirement conditions for employees, in an amount estimated, as of this date, to be between approximately NIS 30 million and approximately NIS 35 million (before tax), which will be immediately credited to the profit and loss statement as part of the 2022 financial statements.
The large-scale layoffs come after about two weeks ago, Isracard finally signed the new operating agreement with Bank Hapoalim, within which the terms of the distribution between the parties were changed in regards to the distribution of the income from the credit card activity issued by Isracard for the bank. As a result of the agreement, the bank’s share of the revenues increased, and Vishrachart has to increase the total funds by approximately NIS 50 million every quarter, for the next eight years.
The transfer of the increased payment has already been reflected in the company’s reports in the last two quarters, when in the second quarter the amount transferred was NIS 47 million and in the third quarter NIS 48 million net. As a result, Isracard, the largest credit card company in Israel, ended the quarter with a net profit of approximately NIS 60 million, compared to a net profit of approximately NIS 99 million in the corresponding quarter last year. The company explained that the decrease in profit in the quarter was mainly due to the increase in payments to banks, which is mostly attributed to the new agreement with Bank Hapoalim, from the aforementioned increase in expenses for credit losses, an increase in payments to international organizations and clubs against the background of the increase in the scope of the group’s activities and an increase in salary expenses. For comparison, Cal ended the quarter with a profit of NIS 86 million (an increase of 28%) and Max ended it with a profit of NIS 65 million (a jump of more than 32%).
Bisrachart explained after the approval of the efficiency plan that it constitutes another step in the implementation of the business strategy led by the company, to focus on the defined growth engines and focus resources on them, as part of the company’s adaptation to challenges and changes in the market.
“The first fruits of the strategic plan are already visible on the ground, in the form of double-digit growth in credit portfolios for private customers and the business sector, a decrease in various operating expenses and a business focus. “The efficiency plan is carried out in full cooperation with the workers’ organization while examining a variety of solutions and assistance programs for employees who will leave the company. , noted in Israchert.
The efficiency plan, which consists of savings in salary, logistics and operating costs, is expected to lead to annual cost savings of between NIS 55 million and NIS 65 million, which will be reflected gradually in 2023 and in full starting with the results of 2024, according to the report.
We will remind you that Bisrachart had previously embarked on an efficiency plan that included extensive voluntary retirement of employees. The previous program was launched about two years ago, and was even expanded when the company announced that due to the interest of employees in the program, the number of employees who finished their work was between 200 and 220, of which about 120 are voluntarily retiring.
At that time, the company estimated that the same plan would enable a reduction of expenses to the extent of millions of shekels, and that the actuarial update of the obligations (beyond the cost of compensation) to the employees in respect of the voluntary retirement plan amounts to between 45 million and 55 million shekels.
Ran Oz, CEO of Isracard: “In accordance with the group’s strategy and the developments in the competitive market in which we operate, we are making the company more flexible, efficient and focused. This is so that we can lead Isracard to a significant competitive advantage and lead the market. Unfortunately, as part of this process, reducing the status of the employees is a reality.”