Competition between Israel’s big banks has moved up a notch. Bank Leumi (TASE: LUMI) today announced a new benefit for its customers by cutting the prime lending rate to 5.75%. Beneficiaries will be the bank’s customers who have a mortgage or consumer loan in the prime track. The benefit will come into effect on October 1 and will be granted automatically, including to customers who take out a mortgage, or a linked loan even after this date.
The bank could be simply acting ahead of expected interest rate cuts in Israel and the US. Jerome Powell, US Federal Reserve chair, sent a strong hint about this at the central bank governors conference held at the end of last week in Jackson Hole. The market believes that the likelihood of a similar move by the Bank of Israel in September is also increasing. On the face of it, however, this is an unusual move that is not customary in the banking system.
“We are aware of the major economic burden on Israelis”
Bank Leumi CEO Hanan Friedman stressed that the aims is to relieve borrowers and mortgage holders who are struggling with high interest rates. He said, “We are aware of the major economic burden on Israeli citizens due to the high interest rate environment and the uncertainty in the economy in light of the war.”
The move is a benefit provided by Bank Leumi as part of the plan outlined by the Bank of Israel last March, when it instructed banks to formulate plans to offer relief to customers worth NIS 3 billion over two years. The plan is designed to avoid legislative steps that would impose restrictions on the banks due to high profitability.
Leumi, for example, also offers 2% interest on the balance of the overdraft, up to NIS 10,000, and a 1% discount on the interest rate charged on the overdraft.
Two weeks ago, Leumi published its second-quarter financial results with net profit of NIS 2.6 billion, 50% of which will be distributed as a dividend. The bank’s stock is at an all-time high, having risen 50% since the start of the year, and its market cap is over NIS 97 billion – the highest in the banking system.
Leumi’s current move follows two other steps introduced this week by other banks. Bank Hapoalim (TASE: POLI) announced that it would distribute two shares worth NIS 126 each to each of its customers, and First International Bank (TASE: FIBI) cut trading fees for young customers.
Published by Globes, Israel business news – en.globes.co.il – on August 27, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
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