Israel's Bank of Israel Allows Banks to Pay 50% Dividend on Profits for Q2 2025.

The Bank of Israel has allowed banks to distribute a 50% dividend on profits for the second quarter of 2025, a one-off decision that may not apply to subsequent quarters. This has led to a sharp gain on the TASE, with the Tel Aviv 35 index up over 1%. The decision is expected to benefit the controlling shareholders of Israel's five biggest banks, with Mizrahi Tefahot and First International Bank owners receiving NIS 68 million more in dividends.

The Bank of Israel has granted banks permission to distribute a 50% dividend on their net profits for the second quarter of 2025, a decision that is expected to have a significant impact on the Tel Aviv Stock Exchange (TASE). This one-off allowance, announced by the Supervisor of Banks Daniel Hahiashvili, allows banks to increase their dividend distributions from net profits [1].

The TASE bank index has responded positively to this announcement, surging over 3% and contributing to sharp gains on the exchange. The Tel Aviv 35 index, which is a key benchmark for the Israeli market, has also seen a notable increase of over 1%, reflecting the market's optimism [1].

The decision is anticipated to benefit the controlling shareholders of Israel's five biggest banks. For instance, Mizrahi Tefahot and First International Bank, which have controlling shareholders, stand to receive an additional NIS 68 million in dividends. This is due to the higher profit distribution, which was initially set at 40% but has been increased to 50% by the Bank of Israel [1].

The TASE's financial performance for the second quarter and the first half of 2025 has been robust, with record results of 29% revenue growth and 80% profit growth. Total revenues for the quarter reached NIS 136.1 million, compared to NIS 105.1 million in the corresponding period last year. Profits for the quarter came to NIS 43.6 million, an 80% increase from NIS 24.3 million in the same period last year. The equity market cap of TASE reached NIS 1.7 trillion at the end of Q2-2025, up 21% from the market cap at year-end 2024 [2].

The increase in dividend distributions is likely to boost investor confidence and encourage further investment in the Israeli banking sector. However, the one-off nature of this decision means that future quarters may see different dividend policies.

References:
[1] https://en.globes.co.il/en/article-bank-of-israel-allows-banks-to-pay-50-dividend-on-profits-1001518544
[2] https://www.morningstar.com/news/pr-newswire/20250805ln44732/tase-reports-the-results-of-the-financial-statements-for-the-second-quarter-and-the-first-half-of-2025