The governor of the Bank of Israel, Amir Yaron, is set to meet with the CEOs of banks in Israel on Tuesday in light of heavy profits made by the banks due to higher interest rates in the past year, KAN news reported on Monday.
The meeting also comes as MKs call for legislation concerning interest rate increases and criticism that about half a billion shekels belonging to the public are sitting in accounts which do not gain interest.
In late May, the Competition Authority requested data from Israeli banks as part of an investigation launched in 2022, saying the banks were enjoying huge profits from higher interest rates on loans but weren’t adequately sharing the benefits with customers.
The top five banks earned a combined profit of NIS 6.3 billion ($1.7 billion) in the first quarter.
Additionally in late May, the Bank of Israel raised the interest rate to 4.75%, the highest it has been since 2006. The spikes in interest rates have caused mortgage and loan payments to rise as well, creating extra expenses for citizens and extra profits for banks.
Israeli banks had general net profit of NIS 24 billion in 2022
The supervisor of banks at the Bank of Israel found that the general net profit of banks in Israel in 2022 was about NIS 24 billion, a 30% increase compared to the year before. The increase was mostly due to an increase in interest income affected by the increase in the consumer price index and the increase of interest rates by the Bank of Israel.
The banks’ income from interest in 2022 was NIS 72 billion, while interest expenses sat at NIS 22 billion, meaning its net income from interest reached NIS 50 billion, a 33% increase compared to the year before.
While the income from interest was offset by the interest expenses, which nearly tripled compared to the previous year, the supervisor of the banks found that the increase in expenses was still lower than the increase in income.
Reuters contributed to this report.
