The public ironed out vigorously, and credit card company profits nearly doubled

by time news

The three local credit card companies – Isracard, Max and ICC – have recently published their financial statements for the third quarter, which show that the economy is returning to normal and that the Israeli public is back to “ironing out” in full force.

Although this is a period in which the Tishrei holidays took place, a comparison between the third quarter of 2021 and its counterpart last year reveals that the turnover of the three companies, which amounted to NIS 107 billion, recorded an increase of more than 15%. When looking at the first nine months of 2021, the increase is even higher, amounting to about 17%, and the turnover of credit card transactions amounted to about NIS 300 billion.

The increase in the volume of transactions naturally increased the aggregate profit of Isracard, Max and ICC, and this amounted to an aggregate quarterly profit of NIS 240 million, an increase of 80% compared to the corresponding quarter. Beyond the increase compared to the corresponding quarter, the aggregate profit of the three credit card companies is higher than that recorded in the first three quarters of 2020, which includes the first closing period following the corona eruption.

ICC and Max reduce gaps from Isracard

In terms of net profit, the company that recorded the largest profit is Isracard, both in the first quarter (NIS 99 million) and in the first nine months of the year (NIS 286 million). However, it seems that the other two companies are narrowing the gaps, with ICC close to it with a quarterly profit of NIS 92 million and a profit of NIS 231 million since the beginning of the year, and Max also records a handsome profit of NIS 135 million since the beginning of the year.

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The high profits of credit card companies have several reasons. The first is an increase in the amount of credit they give to the public and businesses. The companies have set the growth in credit portfolios as strategic goals and as growth engines, and it seems that two of them are succeeding in this, and especially Max, who came out many months ago in a campaign in which she promises lower interest rates than banks offer.

In the third quarter of the year, Max lowered the interest rate it charges on consumer loans, which stood at 7.4%, compared to 7.7% at the end of 2020 and compared to 7.8% at the end of September 2020.

The public responded to the reduction, and Max’s credit portfolio increased in the third quarter by 14.2% compared to the corresponding quarter last year, and amounted to NIS 5.8 billion. In doing so, Max became the credit card company with the largest credit portfolio of the three, surpassing ICC.

The interest rate charged by Max also decreased in business credit, and stood at 5.1%, compared with 5.4% at the end of 2020 and 5.7% at the end of September 2020, which allowed the company to increase its business credit portfolio to NIS 446 million, an increase of 11.2% compared to The balance at the end of the corresponding quarter last year.

In contrast, ICC’s interest rate on consumer credit remained the highest among the companies, standing at 10.3%. Despite this, the company was able to increase its consumer credit portfolio by 2.2%. Isracard will slightly increase the consumer interest rate from 9% to 9.2%, and the company also experienced a decrease of 2.1% compared to the corresponding quarter last year.

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Although in total the credit portfolio of the companies together has grown by more than 4.5%, they still have a long way to go to bite into the market shares of the banks, which still manage more than 90% of the credit in the economy. However, they enjoy a significant advantage as they clear out the businesses, especially the small and medium ones, and therefore know the financial condition of the businesses and can offer them a loan accordingly.

The public uses non-bank cards

Another parameter that has contributed to the profitability of credit card companies, in which they actually give banks a fight, is the number of credit cards. Credit cards are divided into bank cards, some of which are issued by credit card companies for the banks, and share with them the profits that come from the businesses where the public pays through the cards.

Compared to these cards, credit card companies issue non-bank cards, where the charges are made outside the banking framework, and the profits for each transaction go directly to the credit card company. This is income from ticket fees, income from transactions and income from betting on purchases abroad.

Currently, non-bank cards make up about a third of the total number of active cards, and for credit card companies this has significant growth potential. The public tends to request them both because of the increase in the credit line beyond what it receives from banks, and because of value offers it receives from credit card companies, or from customer clubs that issue cards to their members in partnership with credit card companies.

Isracard is the company with the largest number of active and inactive cards, and it stands at 5.6 million. However, when examining the increase in the number of non-bank cards, all companies recorded an increase of between 7% and 8%, while with the exception of ICC, which was not separated under the reform that preceded the bank and still controls Discount Bank, the increase in overall credit cards was Even lower.

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A look at the increase in the number of active cards further illustrates the gaps between ICC and the other companies. While ICC saw an increase of only 2.8% in the number of active non-bank cards, compared with a 4.4% increase in the number of bank cards, Max saw an increase of 11.2% in the number of non-bank cards, compared with 7.1% in the bank cards. Isracard recorded a double increase in active non-bank cards (4.7%) compared to active bank cards (2.4%).

Borrowers meet commitments

Along with significantly increased business activity, the economy’s return to routine has allowed credit card companies, such as banks, to reduce the security cushions that were enlarged with the outbreak of the corona in case the public does not meet its loan obligations.

If in the third quarter of last year the expenses for credit losses of the three credit card companies together amounted to NIS 111 million, in the third quarter of 2021 they have already been reduced to only NIS 28 million. Max even recorded revenue of NIS 1 million in the third quarter in the credit losses section.

Looking at the first nine months of the year, the one that dominated the credit losses item was ICC, which recorded revenues of NIS 18 million, compared to expenses of NIS 190 million in the corresponding period last year.

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