The Bank of Israel has decided to remove its recent restrictions on dividend distributions by the banks and allow them to distribute up to75% of their quarterly profits. First International Bank of Israel is the first to jump into the water, declaring a dividend amounting to 75% of its third quarter profit, NIS 436 million out of a profit of NIS 581 million.
First International Bank says that the dividend represents “50% of the net profit for the third quarter of 2025 and an additional sum out of the cumulative profits available for distribution, in line with the policy of the bank and the instructions of the supervisor of banks.” In the end, however, it makes no difference whether the money comes from profits from previous quarters or the profit in the third quarter; the dividend equals 75% of the third quarter profit.
Banking sources say that the Bank of Israel’s move makes sense. One reason is that the restrictions, together with the banks’ high profits, lead to erosion of their return on equity (although this remains high, at 14-15%). Higher dividend distributions will help the banks to present higher returns. The banks also believe that higher profit distributions will help to remove from them some of the public criticism, which goes as far as the Knesset, and to deal with the demands for taxation of their super-profits.
Theoretically, the banks could distribute more than 75% of their profits, or even more than 100%, but the Bank of Israel expects them not to distribute more and to maintain a degree of conservatism, including in relation to the large surpluses they have accumulated, since there is still some political and economic uncertainty.
The Bank of Israel said in response, “In the previous quarter, the Banking Supervision Department already removed the restrictions on distribution of current dividends. From this quarter, a bank with high surplus capital can distribute an additional dividend, subject to capital adequacy requirements and maintaining appropriate capital ratios that match the present risk environment, which, despite the improvement, still reflects a degree of uncertainty.”
Another bank that released financials this morning is Discount Bank of Israel, but that bank behaved more conservatively and declared a dividend amounting to only 50% of its quarterly profit, at NIS 566 million.
Tomorrow (Tuesday) Bank Leumi and Mizrahi Tefahot bank will publish their third quarter results. Bank Leumi is the largest bank in Israel in terms of its market cap, which recently surpassed NIS 100 billion. Bank Hapoalim, the second largest, with a market cap of NIS 93 billion, will report on Thursday.
When the Swords of Iron war broke out in October 2023, giving rise to fears of credit losses and risks to the banking system, the Bank of Israel limited the banks’ dividends to 40% of their profits. The banks continued to report high earnings throughout the war, posting an aggregate profit of NIS 30 billion in 2024.
In the first half of this year, the banks earned an aggregate NIS 16 billion, as they benefitted from continuing high interest rates. The Bank of Israel’s interest rate remains at 4.5%, after a single cut at the beginning of the war.
Published by Globes, Israel business news – en.globes.co.il – on November 17, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
