Israel Discount Bank Limited

Discount Group reported Q3 2025 net income of ILS 1.13 billion and ROE of 13.7%. Adjusted net income for one-offs was ILS 1.25 billion, implying ROE of 15.1%. Banking operations in Israel generated ILS 890 million of net income and ROE of 14.3%. Total revenues increased 0.9% quarter-on-quarter; fee income rose 2.5% QoQ and 10.9% year-over-year; net interest income fell 0.2% QoQ. Total credit grew 3.4% QoQ and 8.9% YoY. NPL ratio was 0.70%, allowance ratio was 1.3% of total credit, coverage was 191%, and credit loss expenses were 28 basis points. Total expenses decreased 3.8% QoQ and 1.2% YoY, bringing the cost-income ratio to 44%. Tier 1 capital ratio was 10.47%, above the 9.2% regulatory requirement. Management said the board approved a 50% payout of Q3 net income and described that as a gross dividend yield of 5%. Forward-looking commentary included expectation of 2025 GDP growth of 2.5% and 2026 GDP growth of 4.7%, plus management’s view that the CAL sale will likely boost 2026 ROE by 1.2% while reducing Tier 1 by 0.6%.

Morris Dorfman’s tone was confident and defensive of the bank’s consistency, emphasizing that Discount has delivered double-digit ROE over a multi-year period even through two challenging years. He highlighted growth across most loan segments, stable asset quality, and what he sees as the resilience of the Israeli economy. He also framed efficiency improvement as an ongoing strategic priority, saying there is still room to improve costs further in coming years.

Dorfman highlighted strong profitability, with ILS 1.13 billion net income, ILS 1.25 billion adjusted net income, and a 44% cost-income ratio. He pointed to expense discipline, including a 3.8% QoQ and 1.2% YoY decline in total expenses and a 6% drop in salary expenses, while noting the wage agreement may give management more operational flexibility. On balance sheet strength, he cited a Tier 1 capital ratio of 10.47%, a solid liquidity position, and a diversified deposit base with 48% of deposits from retail customers. He also noted that the CAL sale is expected to add about 1.2% to 2026 ROE and reduce Tier 1 by 0.6%.

Analysts asked about the jump in small-business AUMs, mortgage growth, dividends, and additional efficiency opportunities. On mortgages, management said the quarter reflected timing effects from homes bought two to three years earlier in Israel’s prepayment model, where buyers pay 20% upfront and 80% upon completion; it said current mortgage volumes mostly reflect those earlier purchases rather than a sudden sector turnaround. On AUM in small business, Dorfman said there was nothing unusual beyond the bank’s strategic focus on that segment. On dividends, he said the board preferred consistency and therefore chose to keep the payout at 50% rather than change it quarter to quarter, and said that approach should continue. On costs, he said there is still room to improve efficiency in Discount, Mercantile, and potentially through combined actions, as well as at IDB New York.