Cal Reports 42% Profit Rise to NIS 104 Million Despite One-Time El Al Refund

Cal, led by CEO Yafit Griani, reported a net profit of NIS 104 million for Q2, marking a 42% increase compared to the same quarter last year. This result reflects an annualized return on equity of 14.3%, up from 10.5% in Q2 2022. However, the profit includes a one-time gross income of NIS 23 million (about NIS 18 million net) from a marketing grant refund from El Al following the cancellation of the Fly Card agreement. Cal did not exclude this income but offset it against marketing expenses for the replacement Fly All card, presenting a neutralized profit of NIS 104 million. Adjusted for one-time expenses last year, the neutralized profit for Q2 2022 was NIS 100 million with a 14.4% return on equity, indicating that Cal's real ongoing profit of NIS 86 million this quarter shows no growth but rather a decline in profitability despite a 6.6% revenue increase to NIS 843 million.

Cal's business is divided into credit operations and transaction volumes with fees. The credit portfolio grew 16.4% year-over-year to NIS 17.8 billion, including an 11.9% rise in consumer credit to NIS 9.32 billion and a commercial credit portfolio of NIS 1.92 billion. Notably, vehicle financing expanded to NIS 1.07 billion, about 6% of the total portfolio. Net interest income increased 7.3% to NIS 262 million, though financing margins slightly shrank due to a 6% drop in average interest rates amid lower market rates and a shift to lower-risk credit segments.

Transaction and fee income rose 6.6% to NIS 843 million, with total card transaction volume reaching NIS 55 billion and 4.16 million active cards (2.41 million bank-issued and 1.75 million non-bank). Credit card transaction revenues increased 6.7% to NIS 581 million, including a 14.5% rise in foreign transaction fees to NIS 71 million, supported by partial recovery in travel demand despite aviation restrictions and security tensions during Operation Breaking Dawn. Operating expenses grew by NIS 17 million to NIS 298 million, mainly due to higher fees paid to international card organizations like Visa and Mastercard. Credit loss expenses rose 20% to NIS 60 million, driven by updated provisioning, though portfolio quality remained stable with a net write-off rate improving to 1.08% from 1.26% last year.

The report comes amid Cal's ongoing ownership transition, with Discount Bank signing an agreement to sell its holdings to the Union and Harel groups for up to NIS 4 billion, pending regulatory approval. A key upcoming challenge for Cal is managing the post-El Al period after the airline ends its agreement at year-end, which will result in the loss of approximately 381,000 active cards, about 9.3% of Cal's card base. The board notes uncertainty about the direct and indirect impacts on future profitability while Cal seeks alternative growth engines, including the Fly All card, which has gained around 130,000 cards since its launch two months ago, and new club partnerships.