Israeli banks can boost dividends, credit to big firms in 2017, says regulator

Israeli banks will be able to increase dividends and boost credit to large companies next year after raising their capital levels to meet regulatory demands, Supervisor of Banks Hedva Ber said on Wednesday.

The sector has changed in recent years, with credit to more risky large firms down 22% since 2011 while credit to households and small business has jumped 30%, she said.

The banking system was more stable and more competitive in the wake of the global financial crisis and more capable of withstanding the next crisis, Ber told a conference.

“The fact that the banks have met the regulatory requirements will enable them, beginning in 2017, to expand credit to large and manufacturing corporations as well, following a significant decline in this credit in recent years, and to increase the distribution of dividends to shareholders,” she said. Ber said Israeli banks in 2015 distributed 9.5% of net profit in dividends versus a global average of 26.5%.

In the second quarter, Hapoalim, Israel’s largest lender,paid a dividend of 20% of its profit, while Mizrahi Tefahot, the fourth largest, paid out 15%.

Israel’s top banks have core Tier 1 capital adequacy ratios, which measure equity capital as a percentage of total risk-weighted assets, at an average of 10.1% to satisfy stricter regulatory demands, 28% above 2009 levels.

Ber said 2017 would bring more competition in credit supply to households and small businesses, with new players expected following a new law aimed at lowering the cost of credit.

In July, the cabinet approved legislation aimed at loosening the grip of the country’s largest banks on the credit-supply market. Under the law, Hapoalim and Leumi, Israel’s second-largest lender, must sell off their credit-card businesses.