Leumi Leads Israeli Banks with Record Q1 Profit Amid War and New Taxes

TEL AVIV, Israel – May 19, 2026 – Bank Leumi has delivered a powerful demonstration of financial fortitude, posting the Israeli banking system's strongest first-quarter results for 2026. The bank announced a net income of approximately NIS 2.35 billion ($742 million) and a substantial dividend distribution of NIS 1.3 billion ($411 million), signaling robust health and confidence despite a uniquely challenging national environment marked by war, a contracting economy, and a newly imposed special tax on bank profits.

Leumi's performance provides a compelling narrative of resilience, showcasing how strategic focus and operational excellence can drive growth even as the broader economy faces significant headwinds. The results not only surpassed market expectations but also set a high bar for the sector, reinforcing the bank's leadership position.

Navigating Economic Headwinds

The bank's strong quarter stands in stark contrast to the wider Israeli economic landscape. The first quarter of 2026 saw the nation's economy contract at an annualized rate of 3.3%, a direct consequence of ongoing geopolitical pressures and the realities of war. This downturn was characterized by a 4.6% drop in private consumption and a 3.7% decrease in exports, painting a picture of an economy under significant strain.

Yet, within this challenging context, Israel's banking sector has emerged as a bastion of stability, and Leumi's results are at the forefront of this trend. The bank's ability to generate a return on equity (ROE) of 13.6% while growing its loan portfolio and public deposits underscores a deep-seated resilience. This performance is not an isolated incident but reflects a broader trend noted by international rating agencies like Fitch, which have praised the Israeli banking system for its conservative underwriting, strong capital buffers, and consistent performance through successive conflicts.

A Sector-Wide Burden, A Standout Performance

One of the most significant factors shaping the financial landscape this quarter was the introduction of a special "war-levy" tax on bank profits. Passed by the Knesset in March, the legislation was designed to help fund the state's wartime budget by redistributing a portion of the high profits banks generated during a period of elevated interest rates. This one-time payment for 2026, totaling NIS 3 billion across the system, was a considerable burden.

For Bank Leumi, the tax had a tangible impact, reducing its potential ROE by 1.5 percentage points. Without this levy, the bank's ROE would have stood at an even more impressive 15.1%. While all major Israeli banks felt the impact of this tax, Leumi’s ability to absorb the cost and still report the highest net income in the system highlights its superior profitability and capital strength. For comparison, peer institutions also reported ROE figures dampened by the tax, with Bank Hapoalim's ROE falling by an estimated 1.3-1.4%.

This outcome demonstrates Leumi's capacity to navigate significant regulatory and fiscal pressures while maintaining its financial trajectory. The bank’s total capital return to shareholders, a combination of a NIS 968 million cash dividend and a share buyback program, amounted to 55% of its quarterly net income—the highest in the banking system and a clear signal of confidence to investors.

The Engine Room: Efficiency and Strategic Lending

Beneath the headline profit numbers lies a story of remarkable operational discipline and strategic execution. A key metric is the bank's efficiency ratio, which improved to an exceptional 29.1% in the first quarter, down from 32.1% in the same period last year. This figure is not only the best in Israel—significantly outperforming competitors whose ratios are in the mid-30s or higher—but also ranks among the best globally. In an industry where a cost-to-income ratio below 50% is considered strong, Leumi's performance in the high 20s is world-class, a testament to what the bank calls its long-term strategy of technology leadership and AI integration.

This operational efficiency provides the foundation for its ambitious and well-managed growth strategy. The bank's loan portfolio saw responsible growth, with a particular focus on the corporate sector. Corporate credit surged by 10.3% in the first quarter alone, marking a massive 27.5% increase compared to the previous year. While such rapid expansion could raise concerns about risk, Leumi has managed it with exceptional prudence. Its Non-Performing Loan (NPL) ratio remains one of the lowest in the system at a mere 0.40%. Furthermore, for the ninth consecutive quarter, all loan loss provisions were collective, with the specific provision actually recording an income, indicating excellent credit quality and recovery on previously troubled loans.

Beyond Profits: The Dual Mandate in Wartime

Bank Leumi's first-quarter report illustrates a dual mandate: delivering robust financial returns to shareholders while simultaneously serving as a critical support pillar for the national economy and its citizens during a time of crisis. The aggressive expansion in corporate credit, which outpaced the system average, was explicitly aimed at supporting Israeli businesses and key strategic sectors during the war.

This commitment is also reflected in its social initiatives, such as "Operation Lion's Roar," a comprehensive relief program for customers. The bank was the first to announce dedicated support for IDF soldiers, reservists, affected small businesses, and citizens who were evacuated or had their property damaged. Programs like "Leumi Safe Place," which provided hotel rooms for elderly citizens without access to bomb shelters, and "Banker at Your Doorstep" for homebound seniors, demonstrate a deep commitment to corporate social responsibility that goes far beyond financial transactions.

By balancing a record-breaking dividend for investors with extensive support for the public and a strategic injection of capital into the business economy, Bank Leumi has navigated the first quarter of 2026 with a clear sense of purpose. This performance solidifies its status not just as a financial leader, but as a critical pillar of Israel's economic resilience.