Mizrahi Tefahot Bank Ltd. (MZTF)

Net Profit FY2025

ILS 5,630M

2024: 5,455M | +3.2% Y/Y

ROE

17.0%

2024: 18.5% | 2023: 19.1%

CET1 — Tier 1 Capital

10.24%

2024: 10.40%

NPL — Impaired Loans

0.97%

Coverage 116% | 2024: 1.12%

Cost/Income Ratio

35.9%

Among best in the banking system

Mortgage Market Share

36.7%

#1 in Israel

1 Company Profile

Mizrahi Tefahot Bank is the third-largest bank in Israel by total assets (ILS 551 billion in 2025), and the largest in Israel in the mortgage market and in the retail segment of households and private banking. The bank trades on the Tel Aviv Stock Exchange and is a constituent of the TA-35 index. Mizrahi Tefahot is not "just another Israeli bank" — it is structurally different from a universal bank: 61% of its loan book (ILS 244 of 400 billion) is mortgages, and its market share in this segment (36.7%) is nearly double that of Hapoalim or Leumi. This structure produces a different sensitivity profile — to the housing market, to the interest-rate curve, and to mortgage regulation. Ownership structure: the bank is controlled by the Wertheim and Ofer families — a private, founding, long-term controlling stake. This is a key differentiating characteristic compared with Hapoalim and Leumi, which have no defined controlling shareholder. A private controlling stake with a long horizon influences capital-allocation patterns, dividend policy, and multi-year strategic decisions.

Revenue Component 2025	Amount (ILS M)	% of Total
Interest income from ongoing operations	11,304	77.5%
Fees and other income	2,474	17.0%
Non-interest financing income	387	2.7%
Additional income	~423	2.8%
Total revenue	14,588	100%

CEO: Moshe Lari | Employees: 7,200 | Branches: 206 | Source: Annual 2025 Investor Presentation, Annual Report 2025.

2 Key Financial Observations

This summary is not a recommendation. It is a factual list of key financial metrics.

Financial Performance — 5 Years

Year	Net Profit (ILS M)	ROE
2021	3,188	15.8%
2022	4,472	20.1%
2023	4,910	19.1%
2024	5,455	18.5%
2025	5,630	17.0%

Balance Sheet — 2025 vs 2024

Metric	2025	2024
Total assets (ILS B)	551.2	485.6
Loans to public (ILS B)	400.5	358.0
Public deposits (ILS B)	448.4	393.4
Shareholders' equity (ILS B)	34.8	31.3
Total capital ratio	13.05%	—
Leverage ratio	5.88%	—

Loan Book Composition — 2025

Component	2025 (ILS M)	2024 (ILS M)	Y/Y Change
Mortgages	244,163	224,114	+8.9%
Business lending	115,027	95,562	+20.4%
Total loans to public	400,501	357,981	+11.9%

Missing data: NIM (net interest margin) — not disclosed in the investor presentation. Full historical series for Cost/Income — only 2025 = 35.9% is shown.

Net Profit — 5 Years (ILS M)

ROE — Return on Equity (%)

Loan Book — 5 Years (ILS B)

Mortgage Market Share — Israeli Banks (%)

CET1 — Tier 1 Capital vs Peers (%)

Mizrahi's CET1 is low relative to peers — a product of the low risk-weight applied to its mortgage book, not a sign of weakness.

NPL vs Coverage Ratio — 3 Years

NPL falls and Coverage rises in parallel — consistent historical improvement. The real test will come in a cycle that has not yet occurred in the current environment.

3 Industry & Competitive Context

Israeli banking — supervised by the Banking Supervision Department of the Bank of Israel. An oligopolistic market structure with 5 banks controlling approximately 95% of the market. Mizrahi Tefahot is not a head-to-head competitor of Hapoalim or Leumi — it is a specialist bank that grew out of the historical "Tefahot Bank" legacy in mortgages.

Bank	Strategic Focus	CET1 2025	ROE 2025	Mortgage Share
Mizrahi Tefahot (MZTF)	#1 in mortgages, household retail	10.24%	17.0%	36.7%
Hapoalim (POLI)	Universal, corporate	11.98%	15.9%	~20%
Leumi (LUMI)	Universal, international	~12.05%*	—	~20%
First International (FIBI)	Conservative, controlling shareholder (Bino)	—	—	~5%

*Leumi 2024 datum. Mizrahi: lowest CET1 in the group and the highest ROE — two sides of the same capital equation. Buffer above the minimum total capital ratio: 0.55 percentage points (13.05% vs 12.5% regulatory minimum).

Barriers to entry: banking licence, regulatory capital requirements, public trust, branch and technology infrastructure. Specific to Mizrahi — its physical branch network (206 branches) historically oriented toward specific communities (religious, ultra-orthodox, periphery) constitutes a barrier that digital entrants cannot easily replicate.

4 Risk Factors

Risk	Context
Mortgage concentration	61% of the book is mortgages. Elevated exposure to fluctuations in the Israeli housing market and to regulatory shifts (LTV caps, real-estate taxation, reforms). In a housing-market stress scenario, Mizrahi's impact would differ from that of a universal bank.
Interest-rate curve sensitivity	Mortgages are long-duration loans (15-30 years). A change in the Bank of Israel rate affects both the spread on new lending and the economic value of the existing book — not always in the same direction.
CET1 10.24% — limited buffer	The buffer above regulatory capital requirements is relatively tight compared with peers. In a meaningful stress-test scenario, the bank could be required to strengthen capital — which may constrain dividend distributions.
Rapid rate decline	A sharp cut in the Bank of Israel rate could compress the net interest margin, especially if it accelerates refinancing of older, higher-rate mortgages.
Geopolitical risk	Concentrated exposure to the Israeli economy. A security or geopolitical shock affects credit demand, customer income, and repayment capacity.
Mortgage competition	Peer banks compete actively for Mizrahi's share in mortgages. A material decline from 36.7% would weigh on the core profit engine.
Regulation and dividends	Increased capital requirements, possible dividend restrictions in times of stress, reforms of the banking or mortgage markets.
Operational / cyber risk	Like every bank, Mizrahi is exposed to cyber and systems-operational risk.

5 Analytical Lens — The Questions We Ask

In professional company analysis, the question is not "is this good?" but rather "through which lenses must this company be examined so that we do not miss what matters most?" At Bakshi Finance, every analysis passes through six lenses.

This framework is intended to structure analysis, not to produce an investment conclusion.

Growth

The loan book grew from ILS 271B (2021) to ILS 400B (2025) — a 48% increase over five years. Mortgages +8.9% Y/Y, business lending +20.4% Y/Y. How much of the growth is a function of an expanding market versus an increasing share of wallet? How much of the 2025 growth is one-off, and how much is sustainable in a changing interest-rate environment?

Profitability

ROE declined from 20.1% (2022) to 17.0% (2025), yet net profit continues to grow in nominal terms. What is the ratio between the ROE decline and the growth of the capital base? Is the 35.9% Cost/Income ratio a structural outcome of scale in mortgages, or cyclical in a high-rate environment? How will interest income behave as rates fall?

Leverage

CET1 10.24% — the lowest in the peer group, compared with Hapoalim 11.98% and Leumi ~12.05%. The buffer above the minimum total capital ratio is only 0.55 percentage points. What is the practical distance from a regulatory dividend-restriction state? How does the bank intend to support loan-book growth while preserving its capital ratios?

Competitive Position

36.7% share in mortgages and 33.6% in household retail — both #1. To what extent is Mizrahi's advantage structural (the "Tefahot" brand, community-oriented branch network) versus a position that can be challenged? What is the bank's resilience against aggressive competition from Hapoalim and Leumi in mortgages?

Management Quality

Moshe Lari has served as CEO since 2020. A five-year run of double-digit ROE, with provisions declining from ILS 519M (2024) to ILS 228M (2025). What distinguishes management execution from the tailwind of the rate environment? How is the tension between controlling-shareholder interests (Wertheim/Ofer) and minority investors managed?

Business Complexity / Risk

Where would a simplistic analysis of an Israeli bank go wrong specifically with Mizrahi? How should one treat the dual sensitivity — to the housing market and to the interest-rate curve? What are the implications of an ownership structure with a controlling stake for dividend policy, dilution, or potential merger decisions?

6 Scenario Framework

Scenarios are descriptive, not predictive. They outline possible conditions, not expected outcomes.
These scenarios carry no probability assessment, no preferred direction, and no expectation regarding which, if any, will materialise.

Constructive Scenario — if the following conditions hold:

The Bank of Israel rate falls gradually and in a controlled manner (preserving a positive net interest margin, not accelerating sharp refinancing), the Israeli housing market maintains price stability, loan-book growth continues at a double-digit pace, credit quality is preserved (NPL below 1%, Coverage above 100%), and the 50%-of-earnings dividend policy receives sustained regulatory approval. Under these conditions, ROE may stabilise in the 15-18% range and the loan book continues to grow.

Base Scenario — if current trends continue:

Stable rates, a housing market without sharp change, loan-book growth moderating to high single digits, ROE remains in the 15-17% range, Cost/Income remains below 40%. Credit quality stays at its current level. Net profit continues to grow at a single-digit pace.

Adverse Scenario — if the following risks materialise:

A sharp decline in housing prices shifts the risk profile of the mortgage book (possible rise in NPL and provisions), a regulatory change in LTV requirements or housing taxation, an accelerated rate increase that pressures existing borrowers, a material geopolitical event affecting credit demand and repayment capacity, or a regulatory requirement to strengthen CET1 that constrains dividend distributions. Under these conditions, profitability and ROE would decline materially.

Scenarios describe conditions, not forecasts. There is no preferred direction and no probability assessment expressed in this framework.

7 How to Think About This Company

Mizrahi Tefahot is first and foremost "the mortgage bank". Before looking at any other metric, this sentence must be internalised. 61% of the bank's loan book (ILS 244 of 400 billion) is mortgages. Its market share in this segment (36.7%) is nearly double that of Hapoalim or Leumi. This is a bank whose profit and risk structure differs substantively from a universal bank — and it demands a different analytical framework. The quality of the mortgage book versus peers is at the heart of the question: Mizrahi's credit-loss provisions in 2025 stood at 0.06% of the book — an unusually low figure reflecting the quality of the portfolio and the collateral backing. This ratio should be considered alongside NPL (0.97% in 2025) and Coverage (116%). All three metrics improve in parallel, but the true test of loan-book quality has not yet occurred in the current environment.

Sensitivity to the housing market and to the capital ratio — unique to Mizrahi. A universal bank suffers from a crisis in one sector or another — but the impact is dispersed. Mizrahi, with 61% of its book in mortgages, is more directly exposed to what happens in the Israeli housing market. A sharp price decline, a rise in the mortgage rate, or a regulatory change (LTV restrictions, housing-market reform) would affect it differently than Hapoalim or Leumi. In parallel, Mizrahi's CET1 (10.24%) is materially lower than Leumi's (~12.05%) and Hapoalim's (11.98%). This is not a sign of weakness — it is a sign of a strategic choice that reflects Israeli regulation, which assigns a lower risk-weight to mortgages. In practice, Mizrahi runs less capital per unit of asset — and that is the principal reason for the relatively high ROE (17-20%) compared with Hapoalim (15-16%). This difference — between CET1 and ROE — is not accidental; it is at the core of the bank's capital model.

Where the analysis may go wrong. First error — assessing Mizrahi's ROE (17.0% in 2025) on the same axis as Hapoalim's ROE (15.9%) without factoring in that Mizrahi's CET1 is lower. When the CET1 gap is neutralised, the picture changes. Second error — treating the mortgage book as "safe" automatically. It is asset-backed — but in a potential housing-market crisis, credit-loss provisions could spike sharply. Third error — ignoring rate sensitivity. In a bank whose book leans on long-duration mortgages, the interest-rate curve is not a marginal parameter; it is a primary dimension. In a rising-rate environment, the spread on new mortgages improves but the economic value of the existing low-rate book is impaired; in a falling-rate environment, accelerated refinancing can erode the old book too quickly. Fourth error — viewing ROE of 17% as a "decline" from 20.1% in 2022 without contextualising that the capital base has grown materially, and that 2022 was an exceptional year of sharply rising rates.

What distinguishes professional analysis of Mizrahi from headlines. Headlines on Mizrahi speak of "record profit" or "leading market share". Professional analysis addresses four things: (a) what the loan-book structure implies about sensitivity to the housing market and the interest-rate curve; (b) whether the 35.9% Cost/Income ratio is a structural outcome of scale in mortgages or cyclical in a high-rate environment; (c) what a lower CET1 relative to peers means — as part of the capital model, not as weakness; (d) how the Wertheim/Ofer controlling stake shapes capital-allocation patterns (stable 50%-of-earnings dividend declared for Q4/2025, long-term strategic horizon) versus banks with no controlling shareholder. These are the questions that lay the foundation for a decision, not a rating or a recommendation.

The difference between surface-level analysis and professional thinking often lies in the variables that are not immediately visible.
The difference between surface-level analysis and professional thinking often lies in the variables that are not immediately visible.

8 Sources & Data

#	Source	Date	Type
1	Mizrahi Tefahot — English Investor Presentation, Annual 2025 (P1724675-00)	2026	Official — Investor Presentation
2	Hebrew Annual Report 2025 (P1724661-00)	2026	Official — Periodic Report
3	Pillar 3 Risk & Capital Disclosure 2025 (P1724661-01)	2026	Official — Risk Disclosure
4	maya.tase.co.il — official filings	Ongoing	Official — Stock Exchange
5	Peer investor presentations (POLI, LUMI) — CET1 comparisons	2025-2026	Official — Peers
6	stockanalysis.com / bizportal — multiples	April 2026	Secondary

Missing data: NIM (net interest margin), full historical Cost/Income series, identity of the Chairman of the Board, full shareholder breakdown beyond the controlling stake.

Mizrahi Tefahot Bank Ltd.

Financial Performance — 5 Years

Balance Sheet — 2025 vs 2024

Loan Book Composition — 2025

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