Minister of Finance Bezalel Smotrich told the Eli Hurvitz Conference on Economics and Society today that he plans to tax the growing profits of the banks following the past year's interest rate hikes. The Tel Aviv Stock Exchange (TASE) Banking Index is currently down 2.4% following the announcement.
Smotrich said, "It is not possible to talk in the context of the fight against concentration and the cost of living about the bank's profits as a result of the increase in interest rates. They are making these profits from the current situation and the large interest gaps between credit and deposits, and not through hard work and efficiency."
He added, "I find a lot of logic in taxing these excess profits at high rates, mainly to prevent the banks from having the motivation to obtain them, and to make them roll them back to the public using the variety of tools at their disposal."
Smotrich thinks that such a tax on excess profits is, "The best way to correct the injustice created by interest rate gaps and ease the situation for mortgage takers, without needing the damaging legislation reflected in some private members bills that have been tabled."
Smotrich spoke about the huge profits recorded by the banks over the past 30 months. In 2021, Israel's five biggest banks, Leumi, Hapoalim, Discount, Mizrahi Tefahot and First International, reported record joint profits of NIS 18 billion. This record was broken in 2022, when the joint profits of the five biggest Israeli banks rose to NIS 24 billion, mainly due to the rise in interest rate income, which was passed onto loans but less so to deposits. The average annual mortgage repayment has risen by NIS 1,200 over the past year.
2023 has seen the banks' profits continue to rise. In the first quarter of the year, the combined net profits of the five biggest banks was NIS 6.25 billion, even though Leumi reduced its profit by NIS 1 billion because of the sharp fall in the share price of US bank Valley National in which it holds a major stake.
Published by Globes, Israel business news - en.globes.co.il - on May 30, 2023.
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