Rising inflation forced the Bank of Israel to raise interest rates in recent months, and the main and immediate beneficiaries of this were the entities that grant the loans. Three banks – Hapoalim, Discount and International and the three credit card companies – Isracard, Max and Cal increased their income from interest in the third quarter following the Bank of Israel’s move to a total of more than NIS 2 billion.
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It should be remembered that during the third quarter of this year the Bank of Israel raised the interest rate by 1.25%, while in the two years of interest rate increases that came after its end, in October and November, the interest rate increased by an additional 1.25%, so that even in the fourth quarter they will still benefit from the move that so far has not been able to stop the climbing inflation, as happened for example in the USA.
Bank Hapoalim’s large credit portfolio (NIS 381 billion), which continued to grow even in the third quarter, brought the bank interest income of NIS 1.1 billion, while Discount also generated interest income of almost NIS 1 billion during this period. The credit card companies are still far from there in terms of volumes, with the three together managing NIS 23 billion, but they publish every quarter the interest they have collected from customers, a figure that shows the effect of interest rate increases on profits.
As: with the high interest rate in the system
Cal is still the company with the highest interest rate in the system and it increased the interest rate on loans to the private sector by 0.5% to 10.8%, when in September the average interest rate for private individuals was 11%. We note that not all of the Bank of Israel’s interest rate increase (as mentioned, 1.25% in the third quarter) was passed on to consumers.
At the peak, the interest rate for individuals was 9% and last month at 9.7%. This is compared to an average interest rate of 7.8% in the entire second quarter and 8.1% in the last month of that quarter, when despite the increase it still offers the lowest interest rate among credit card companies. In Bisrachart the average interest rate for individuals rose from 9.3% at the end of June to 10.1% on average in the entire third quarter, although in September alone the average interest rate stood at 9.6%.
The average interest rate in banks: 7.23%
Regarding the banks, Bank of Israel data reveal that in September the average interest rate in the banking system on loans was 7.23%, with the rate between the banks varying between 4.73% (One Zero) and 13.2% (Bank of Jerusalem).
It must be remembered that the increase in interest rates is both an advantage for customers and a disadvantage for banks, because the latter are forced to raise interest rates on public deposits as well. The average interest rate in variable interest rates (prime) was 0.9% in September, while there are banks that offer an interest rate of 2% or higher, while in June, i.e. at the end of the second quarter, it was only 0.2%.
Inflation also improved the banks’ income
Along with the income from interest, inflation also improved the income of the banks. The well-known index (refers to one month before the beginning of the period in question and one month before its end) increased by 4.4% in the first nine months of the year, compared to an increase of 2.2% in the corresponding period last year. The well-known index rose in the third quarter at a high rate of 1.2% compared to 0.8% in the third quarter last year.
Due to the effects of changes in the index, Hapoalim recorded an income of NIS 330 million in the third quarter compared to NIS 159 million in the corresponding period last year and an income of NIS 1.14 billion in the first nine months of the year compared to NIS 361 million in the corresponding period last year.
The International reported that the index changes contributed to an income of approximately NIS 190 million in the first nine months of the year, compared to an income of approximately NIS 87 million in the corresponding period last year. In the third quarter of this year, an income of approximately NIS 61 million was recorded, compared to NIS 36 million in the corresponding quarter last year.