Yes, there is a lot of space for privatization and full open market in the Israeli Bank market. In the rather socialist styled market of Israel, it makes no wonder that big players profit hugely in times of war and stress. This in a well-known phenomenon.
And again, the thesis is proven. There are two main factors which drive the profit of banks in a rather state-controlled economy.
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Increased Government Borrowing: Wars are expensive. Governments typically finance them by issuing bonds or taking loans, which banks facilitate. Banks earn interest on these loans and fees for underwriting bonds, boosting their revenue. For example, during World War I and II, major banks in the U.S. and Europe profited from handling massive war bond sales. The budget deficit of Israel widened to 7.9% of GDP in 2024, up from 4.2% in 2023, increasing government borrowing, much of it facilitated by banks. Israeli Banks played a critical role in funding a 30 billion NIS war budget in 2023 and additional tens of billions in 2024, alongside a 15 billion NIS business support package. For this role, they get good interests.
Higher Demand for Credit: War stimulates economic activity in certain sectors—think weapons manufacturing, logistics, or energy. Businesses scaling up to meet wartime needs often borrow heavily from banks, driving up interest income. At the same time, disrupted trade can lead to shortages, pushing prices (and profits) higher for those financing the supply chain.
And the development of sales for credits in the year 2024 gives evidence for this assumption.
And the figures that the Bank Hapoalim can present are impressive indeed. They are paid by the citizens who have not much alternatives.
While the exact 2024 figures aren’t fully available, the banking sector’s asset base likely exceeded $700 billion, driven by credit expansion and war-related economic activity. The bank credit segment, which was $395.6 billion in 2022 (57.6% of total assets), remained dominant.
Israel needs a free market in the banking sector.
Based on the Bank Hapoalim report, all data were fetched by AI, digital research and analogues research. Pic Ai-generated. Illustrative.