The government’s austerity measures are starting to reach people’s pockets, according to data available to Ran Oz, CEO of Isracard (TASE: ISCD) , the largest credit card company in Israel. Oz says that the disposable income of Israelis is shrinking, and he points to expenditure such as on food, overseas travel, and insurance, as areas in which inflation appears to be much higher than emerges from Central Bureau of Statistics figures.
In the first quarter of this year, Isracard posted a 10% rise in revenue, to NIS 838 million. The growth stemmed from greater credit card use, but also from expansion of the company’s credit portfolio, which has become an important growth engine for it. Isracard’s net profit fell 14% to NIS 55 million, because of a one-time expense of NIS 62 million arising from the cancellation of the investment agreement with Menora Mivtachim. The cancellation was part of the agreement for the takeover of Isracard by Yitzhak Tshuva’s Delek Group, which awaits approval by the supervisor of banks.
“A very large part of the rise in consumer expenditure is due to price rises,” says Oz. “While the Central Bureau of Statistics reports annual inflation of 3% (3.6% in the twelve months to the end of April, H.S), in the main areas of consumption we are seeing price rises of more than 10%.
“It can’t be that people are buying a lot more food; they keep eating much the same quantities. They certainly aren’t buying a lot more insurance. It follows that they are simply paying much more. I think that what happened in the first quarter is that at some point the decline in disposable income starts to filter through. All the austerity measures that have been imposed people since January gradually catch up with them.”
Credit card turnover rising rapidly
On the basis of the credit loss provision for the first quarter, the quality of the credit portfolio that Isracard is building looks good. The quarterly credit loss expense fell from NIS 75 million in the first quarter of 2024 to NIS 69 million in the first quarter of this year. In the fact, the write-offs that Isracard makes have been falling steadily, which Oz says is testimony to hard work on improving the credit portfolio. The portfolio grew by NIS 528 million over the first quarter, and by NIS 1 billion year-on-year, reaching NIS 10.3 billion at the end of March.
Turnover on credit cards totaled NIS 61.1 billion in the first quarter, representing a year-on-year increase of 10%. Isracard is also gearing up to become a bank. A committee led by the Bank of Israel Banking Supervision Department is currently working on giving relaxations to entities such as Isracard allowing them to become small banks (up to NIS 50 billion balance sheet footing). Isracard currently has shareholders’ equity of NIS 3.1 billion, and a tier-1 capital adequacy ratio of 11.3%, which is much higher than the 8% minimum required by the regulations.
Published by Globes, Israel business news – en.globes.co.il – on May 21, 2025.
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