Israel's credit card companies continue to be cash cows for the banks. The companies' aggregate net profit was NIS 444 million in January-September 2010, 1% less than in the corresponding period of 2009. The decline was due to the reduction in online clearing activity by Israel Credit Cards-Cal Ltd. (ICC-Cal) (Visa).
The companies' aggregate revenue rose 4.5% to NIS 2.65 billion in January-September from NIS 2.53 billion in the corresponding period, according to their financial reports.
Israel's credit card companies are Isracard Ltd., wholly owned by Bank Hapoalim (TASE: POLI); ICC-Cal, owned by Israel Discount Bank (TASE: DSCT) (71.2%) and First International Bank of Israel (TASE: FTIN) (28.8%); and Leumi Card Ltd., owned by Bank Leumi (TASE: LUMI) (80%) and Azrieli Group Ltd. (TASE: AZRG) (20%).
Credit card use continued to increase during 2010. Credit card transactions (excluding cash withdrawals from ATMs) totaled NIS 136 billion in January-September, 9.8% more than in the corresponding period of last year. The total is expected to reach NIS 180 billion for 2010 as a whole.
Non-bank credit given by the credit card companies directly to their customers has reached NIS 4 billion. This credit is very expensive: ICC-Cal charges an average interest rate of 12.1%, reflecting the Prime rate plus 8.6%; Leumi Card charges an average interest rate of 11.5%, and Isracard charges the lowest rate, at 9.49%.
Isracard is the largest credit card company, with a turnover of NIS 66.3 billion in January-September, up from NIS 60 billion in the corresponding period. Its profit rose 5.6% to NIS 150 million. The company's profit margin is low for its turnover, because it pays Bank Hapoalim a substantially higher commission that the commissions paid by the other companies to the banks that own them. Isracard's revenue rose to NIS 1.16 billion in January-September from NIS 1.05 billion in the corresponding period. Its CEO is Dov Kottler.
ICC-Cal had the highest profit. Despite a year rife with scandals, from the flaws in online clearing and fines levied by international credit card companies, through the resignation of its CEO, the ouster of the CEO of a subsidiary, and the replacement of most of its management, the company posted a profit of NIS 176 million in January-September. Excluding a one-time gain of NIS 16 million from the sale of shares in Visa Inc. (NYSE: V), ICC-Cal's net profit was 19.5% less than in the corresponding period. Most of the drop in profit was due the reduction in clearing of online pornography and gambling transactions.
ICC-Cal's revenue fell to NIS 835 million in January-September from NIS 868 million in the corresponding period. Turnover rose 8% to NIS 34.3 billion in January-September. Its CEO is Israel David.
Leumi Card, run by CEO Danny Cohen, continued to consolidate its position as Israel's second largest credit card company. Its turnover rose 10% to NIS 35.4 billion in January-September, and its profit rose to NIS 118 million in January-September from NIS 108 million in the corresponding period. Revenue totaled NIS 649 million in January-September, 5.5% more than in the corresponding period.
Leumi Card reported 17% growth in non-bank credit, the highest growth among the credit card companies.
Published by Globes [online], Israel business news - www.globes-online.com - on November 22, 2010
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