IsraCard Reports Decline in Profits Amid Economic Challenges
IsraCard, Israel's largest credit card company, has reported a 2.5% decline in net profits, totaling 78 million shekels (approximately $20.8 million). This downturn is attributed to the ongoing economic challenges exacerbated by the war, which has hindered the company's recovery efforts. Despite a record high in transaction volume, reaching NIS 63.2 billion (around $16.9 billion), CEO Ran Oz emphasized that this increase is largely due to rising prices rather than a genuine growth in consumer demand.
Impact of Rising Costs on Consumer Behavior
Oz highlighted that while the volume of transactions has increased by 9.1% compared to the previous year, consumer spending habits have changed significantly. For instance, spending on overseas trips has only decreased by 8% despite a 30% drop in the number of trips taken. This indicates that consumers are paying more for fewer services. Additionally, sectors like insurance and food have seen price hikes of 15% to 20%, further straining household budgets in Israel.
Adjustments in Credit Risk Assessment
The company's consumer credit portfolio has also experienced a decline of 1.1%, now standing at NIS 7.2 billion (about $1.9 billion). This marks a significant shift from the previous year, where the portfolio had grown by over 60%. In response to regulatory changes from the Bank of Israel, which included suspending delinquency reports to assist customers affected by the war, IsraCard has had to adjust its credit risk assessment strategies. This shift has led to a reliance on manual assessments, impacting growth rates and necessitating a reevaluation of their operational strategies.
