The largest banks in Israel.
Great performance for the shares precisely in view of possible negative effects of the reform on the economy (Photo: ShutterStock)
The fear was that an increase in the trend of spending money would reduce the ability of the banks to give loans and credit to the various companies, thereby reducing the ability of the companies and the Israeli economy to grow on the one hand, along with harming the results of the banks themselves on the other hand.
However, an examination of the shares of the five largest banks in Israel shows that investors continue to believe in the Israeli economy and Israeli banks.
Even the warning issued by Moody's, one of the three largest credit rating companies in the world, that if the changes proposed in the legal reform/revolution are implemented in full could create long-term risks for the Israeli economy, did not prevent the rise of bank stocks yesterday.
Thus, the Tel Aviv Banks Index, which summarizes the fluctuations of the shares of the major banks traded on the Tel Aviv Stock Exchange, has risen by 1.8% since the end of last January, compared to the Tel Aviv 35 Index, which aggregates the fluctuations of the 35 largest companies in the economy that are traded on Haozat Beit (among them the banks). which decreased by 0.5% for the same period.
The main jump during this time occurred since the rating agency Fitch left Israel's credit rating intact, signaling to investors that Israel's economy is stable.
The Tel Aviv Banks Index has since jumped by 6.57%, along with the Tel Aviv 35 Index which rose by 4.72% for the same period.
Even the fear of an increase in the trend of spending money, in the issuance of the Bank of Israel governor's directive to bank managers for regular updates on the subject, did not move the cheese for investors.
The Tel Aviv Bank Index rose by 2.4% since March 6, while the Tel Aviv 35 Index rose by 1.75%.
Bank shares: proof that the solid foundations of the Israeli economy are stronger than the panic caused by the reform.
At least for now (photo: Walla! system, without)
reform?
interest!
The question arises as to how fears of economic damage, which directly concern the banks' activities, do not affect their shares?
For the capital market things are clear, the fears of the uncertainty following the public unrest arising from the legal reform/revolution, along with the fears of the downgrading, initially led to a decline in bank share prices.
But the prospect of positive business results for the banks, along with the continuation of the trend of raising interest rates that they enjoy, and leaving Israel's credit rating intact, quickly returned investors to the shares of financial institutions.
The economic fog, however, still does not dissipate, but not due to the public protest against the legal reform/revolution, but rather the rise of inflation and the interest rate that tries to curb it.
And especially the preventive measures carried out by the American super economy, which affects the growth and conduct of the rest of the world's economies.
Jerome Powell, the chairman of the Federal Reserve, stated two days ago in the American Congress that the war on inflation is still in progress and that the trend of rising interest rates will continue, and the latter is a stone in the shoes of the world's economies. The question asked by everyone is when the interest rate will be too high, or alternatively - when to stop.
This is due to the fear that too high an interest rate will lead consumers to significantly lower their expenses, thus starting a snowball that will lead companies to lay off employees, who will not be able to meet their debt payments, etc. The banks do have different solutions such as extending the interest rate (cont
. average life) for a loan and deployment for additional payments, but these are only temporary solutions that will not be able to withstand lasting damage, and especially when there will be a wave of businesses that will not be able to pay debt.
In Israel, at this time, the banks broadcast that the households are currently stabilized, and this is also the image that the Bank of Israel broadcasts to the Israeli government - everything seems stable.
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Mizrahi Bank.
Despite the effect of the stoppage in real estate on the mortgage market, it performs better than its peers (Photo: ShutterStock)
An alternative to real estate
This extreme scenario is probably not yet visible to the investors, who see for the time being that the banks continue to be stable.
And even if profitability is harmed and the banks do not benefit from the rising interest rate environment as they initially thought, they are still one of the only groups that benefit from such an interest rate environment, and are a safer alternative, in the eyes of investors, to the real estate companies, whose funding costs burden them
. From what is happening in the real estate industry is Mizrahi Tefahot, known especially for its activities in the mortgage sector.
But the bank showed growth in other activities, such as business and retail banking - and its stock jumped at the highest rate among the five banks, with an increase of 4.41% since the beginning of February this year, 9.12% since the publication of leaving Israel's credit rating unchanged, and 4.23% since the governor's order to update current on spending money.
The stock that presented the least strong results was that of the International Bank, which fell 2.74% since the end of last January.
The legal reform/revolution, however, is not relevant to her at all, since the International Bank is not international at all.
In the capital market, it is explained that the trend of the transfer of funds from the current account to deposits was relatively broad internationally, and it was its leverage over the other banks, but this leverage is getting smaller. At the same time, investors are also looking at alternatives among the bank stocks, and are mainly looking at the more attractive multiples. It is evident
that The market is beginning to converge on the hope that the legal reform/revolution is on the way to a compromise, and in a world of rising interest rates, investors want to be in the worlds that benefit from this - in bank stocks.
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Mizrahi Bank
the international Bank
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