Bank Hapoalim B.M. S/Adr

and thank you for standing by. Welcome to the Banco Pualim fourth quarter and full year of 2025 results conference call webinar. For your convenience, this call will be accompanied by a PowerPoint presentation. May we suggest, if you have not yet done so, that you access the presentation on the bank's website, www.BancoPualim.com, by clicking on financial information on the homepage and then click on the annual report presentation. All participants are at present in listen-only mode. Following management formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded March 5th, 2026. With us on the line today are Mr. Yadin Antebi of Bank Apoalim, Mr. Ram Gev, CFO, Mr. Victor Baha, Chief Economist, and Mr. Mark Koblenz, Head of Investor Relations. I would like to remind everyone that forward-looking statements for the respective company's business, financial condition, and results of its operations are subject to risk and uncertainty that could cause actual results to differ materially from those contemplated. Such forward-looking statements include but are not limited to product demand, pricing, market acceptance, change in economic conditions, risk in product and technology development, and the effect of the company's accounting policies, as well as certain other risk factors, which are detailed from time to time in the company's filings with the various security authorities. In the event of a siren in Israel, we will pause briefly and resume the call as soon as possible. Mr. Antebi, would you like to begin?

Thank you. Good afternoon, and thank you for joining us for our view of the Bank's 2025 results. We are publishing our financial statements and holding this call at a time when the geopolitical environment in the Middle East and around the world is undergoing material change. We continue to witness Israel's unique resilience and its ability to adapt rapidly. Throughout its history, Israel has consistently emerged stronger from periods of adversity, and we believe that after the current conflict, the economy is positioned to regain strength and to continue to grow. With this environment, Banker Podium will continue to play a meaningful role in supporting the recovery and growth of the economy. Let us now turn to the results. We ended 2025 with very strong results. Net profit of 9.8 billion, return on equity of 15.9%, loan growth of 13.4%. These results reflect the disciplined execution of our strategy, which I will touch on shortly. Alongside these strong financial results, this was a year of significant activity across the bank. We advanced a number of innovative and impactful initiatives, including growth across all business centers. the introduction of two-year financial targets, the distribution of bank shares to our customers under the Bank of Israel outline, the launch of an AI bot that supported the share distribution process, a new marketing strategy of proactive banking, and a major step forward in the development of Build Our Payment Pack. All these efforts led us to deliver results that exceeded the targets we published a year ago. Net profit of $9.4 billion, excluding income for insurance, versus a target of $8.5 to $9.5 billion. Return on equity of 15.3%, excluding that income, versus a target of 14 to 15%. credit growth of 13.4%, compared with a target of 7%. Dividend payout of 50% for the year, or 53% from the moment the Bank of Israel permitted the distribute more, versus a target of at least 50%. Looking ahead, it is clear that the macroeconomic environment has changed compared with a year ago. When we publish a target, our targets for 2025 and 2026. GDP growth assumptions have improved, but market implied interest rate and inflation are lower for the next two years than they were a year ago. Nevertheless, most of the updated two-year targets we are publishing today are higher than the previous ones. For 2026 to 2027, we expect net profit of 9 to 10 billion, return on equity of 14 to 15%, accelerated loan growth of 59%, and a higher payout ratio of 50 to 60%. It is important to note that towards the end of the year, we will begin the relocation to the new Torim Center building. As part of this transition, we intend initiated steps to realize and enhance our own real estate assets. Accordingly, starting in 2027, we expect to recognize free tax gains of between 800 to 900 million, which we have reflected in the updated targets. Regarding the special tax on banks, our assumptions reflect an impact similar to that of the past two years. I would like to briefly review the progress we have made in executing the strategic focus areas we approved about a year ago. As a reminder, our strategic focus areas are sales growth, leadership in service and fairness, BIT as an innovation engine, operational efficiency, Gen AI and data. In our retail activity, the focus is on strengthening sales capabilities across all channels, branches, call centers, and digital. To support this, the division underwent an organization restructuring designed to enhance sales effectiveness and customer service. We adopt a proactive service model and introduce new service standards. Naturally, many of these processes intersect with technology, and here, too, we made a substantial leap forward with the implementation of an AI bot as a foundation for future automation. In mortgages, we made a major improvement in SLA, which also helped us improve pricing. Here as well, we are already seeing results. including an increase in our marginal market share. In corporate banking, our goal is to accelerate growth with maintaining excellent portfolio quality and healthy markets. One of our key achievements this year was a significant reduction in the end-to-end credit approval process, benefiting both our customers and our growth objectives. We also enhance our digital offering for corporate clients, and today we provide fully digital end-to-end services. In our capital markets activity, we are the number one player in Israel, both the country's largest brokerage and exceeding trading. On inequity, our real assets investments continue to grow at an average pace of about $1 billion per year. This year, it also recorded substantial realizations, resulting in strong profitability. Bait is a success story, I am extremely proud of. With 3.5 million active customers and an annual P2P transaction volume of 30 billion shekels, Notably, two-thirds of our BIT customers conduct their primary banking activity with other banks, representing a major growth opportunity for us. Over the past year, BIT reached an important milestone with the launch of new products and services that generate revenue and or reduce costs. We intend to continue expanding our offering to provide BIT users with solutions that simplify and enhance their financial management. We are already a highly efficient bank with a cost-income ratio of below 35%, but we still see room for further improvement. We have a retirement program under which about 10% of our workforce will retire by 2028. In addition, we are making There are no shortcuts here, just vigorous management. We are already seeing solid results with a nearly 8% reduction in other expenses this year. Alongside this potential as described, I would like to highlight several strengths as we enter 2026. We have accumulated the largest credit loss reserves in the system, which I believe will decline in a more stable geopolitical and economic environment. We have the highest financial margin in the industry, reflecting profitability-oriented growth and disciplined balance sheet management. We hold significant gains in the available for sale portfolio, while competitors carry losses. And as noted, we intend to sell our real estate assets, similar to steps already taken by FUSE, and recognize pre-tax gains of $800 to $900 million starting 2027. Today, nearly every bank or company speaks about Gen AI and data. We're not only talking, we have made substantial progress in this area. Our goal is to extend the use of capabilities to support operational and business processes, reduce SLA, and more. One of our successful use cases is Danit, our AI bot, which handled thousands of customer calls during the shared distribution campaign we conducted. The bot handled most calls and completed the process end-to-end. Before I hand it over to Ram to review the quarterly and annual results, I would like to reiterate our targets for 26 and 27. Net profit of 9 to 10 billion, return on equity of 14 to 15%, accelerated loan growth of 8 to 9%, and higher payout ratio of 50 to 60%. Thank you, and Ram, please go ahead.

Thank you, Yadin. and good afternoon to everyone on the call. I'm happy to walk through the bank's fourth quarter and full year 2025 results in the next few minutes and discuss the key drivers behind what we consider an exceptional year for the bank. A year marked by a high return on equity, nearly $10 billion in net profit, strong business momentum, and all supported by excellent capital strength and high-quality credit metrics. Let's dive into the numbers and start with slide 20, where we are showing the continuous growth in profitability. This morning, we reported a 15.9% return on equity for the full year, with net profit of 9.8 billion shekels and an NPS of 7.43 shekels. Adjusted for the 380 million shekel income, we recorded from insurance reimbursement in the third quarter, ROE is 15.3% and the net profit is 9.4 billion shekel, both completely above our financial targets. The fourth quarter profitability was impacted by a negative CPI and a one-time 200 million shekel provision made in respect of the labor dispute As a result, the reported ROE of 13% for the quarter does not fully reflect the bank's underlying profitability. Next, let's talk about our credit book. We continued to deliver strong and high-quality growth throughout the year. In 2025, total credit increased by 13.4%, of which 4.9% in the last quarter. to a balance of more than 500 billion shekel. Another important key quality of our portfolio is its diversification across segments. This is a key parameter not only from a growth and risk balancing perspective, but also because it gives a greater flexibility to be selective in how we grow and to allocate growth to areas where we see stronger profitability profile. growth was recorded across all segments in 2025 and in various economic sectors. This is a reflection of our ability as a leading bank to translate the strengths of the remarkable Israeli economy into growth in our activity. Corporate credit grew 25.8%. For merchant credit, essentially middle market businesses grew 11.3%. In retail activity, consumer mortgages and small businesses grew roughly 7 to 12%. The next slide, slide 23, present our financing income. The consistent growth trend in our financing income and margins reflects two key factors. Increased business activity combined with government bond portfolio repositioning. As a reminder, as part of this process, we realized losses on legacy securities, mostly in 2024, and we invested in higher yield and longer duration assets. This resulted in 9.6% growth in total financing income and a slight increase in the financial margin. This was achieved despite a lower contribution from the CPI and ongoing competitive pressure on margins, and unlike all our peers. On the right-hand side, we show the income from regular financing activity excluding the CPI, which is consistently growing, and further highlights the aforementioned key strengths. In this slide, we take a quarterly view of financing income. The volatility of the CPI resulted in a gap of over 650 billion shekels between the fourth and third quarters. This is the reason for the decrease in income from regular financing activity and margin. Here as well, we show the income from regular financing activity excluding the CPI, which, due to the growth in activity, continued to grow nicely. On fees, the positive trend continues across various types of fees, as our business activity continues to expand. Total fees grew 11.3% in 2025, driven by most fee types, such as securities, conversion differences, and account management fees. The increase in credit card fees is mainly attributed to one-off revenues received from the international card organizations. Let's move to present our disciplined cost management. The takeaway here is that even alongside the impressive growth in our activity, total expenses are down. Or if we adjust for one-off, total expenses remain flat year on year. Looking at the cost-income ratio in both presented years, there were one-offs. In 2024, we provisioned for an early retirement plan, almost 600 million shekels. And on the other hand, 2025 income included the insurance reimbursement. So if we look at the adjusted figures, the cost-income ratio is down to the mid to low 30s. This is among the lowest efficiency ratios globally. In the fourth quarter, expenses increased due to several non-recurring items, primarily the provision related to labor dispute at the bank. Just to give you some color, we are currently working on structural changes to the bank's employment framework, changes that will yield benefits for many years to come. While no agreements have been finalized yet, we have recognized a provision in anticipation for a future settlement. On slide 27, our productivity ratios, which have been improving over time. Both income per employee and credit per employee support the positive Joe's effect. Moving on to discuss provision for credit losses and the quality of our book on slides 28 and 29. Provision for credit losses amounted to 421 million shekel, or 0.31%, of our credit book, driven completely by the collective allowance and net automatic charge-offs. Increasing the collective allowance reflects our prudent approach and is due to the growth of the credit portfolio and the continued uncertainty in the economic environment. Individual provision, however, saw income due to recoveries. It's important to highlight that this prudent approach places us in the strongest position entering 2026 relative to peers, with high reserve levels and the highest reserve ratio across a range of scenarios. On credit quality metrics, on the left-hand side, we see the NPLs continue to drop, now at 0.48%. while the NPL coverage ratio continued to rise to more than triple the NPL's as we continue to increase the collective allowance. On the right hand side, the allowance to loans ratio remained high at 1.72% and over 95% of the total allowance is collected. The next slide. The bank has the largest retail deposit base in the sector, which provides a significant competitive advantage. Our deposit base continued to grow in 2025, 3.2% in the last 12 months. Retail deposits decreased this year, but still represent 54% of total deposits. Liquidity ratios, NCR and NSFR, continue to be well above the minimum requirement. Now, let's move to present our capital position, which continues to benefit from strong organic generation capabilities, leading to 11.2% growth in the last year. The CD1 capital ratio rose 11.98%, and you can see in the waterfall graph the contribution of our strong profitability, and to a lesser extent, the positive OCI, allowing for substantial growth in activity, as well as substantial profit distribution to our shareholders. On dividends, our strong capital position allowed us to increase our profit distribution, where in addition to the 50% payout, we declared a distribution of additional 200 million shekels. This sums up to 60% distribution for the fourth quarter, 48% by cash dividend, 0.79 shekels per share, and the rest through share buyers. So for 2025, total shareholder distribution amounted to 50% of net profit, consistent with our financial target, driven by a 4.1 billion shekel cash dividend, reflecting a 4.6% yield, and 4.9 billion shekel total distribution. Before we move to briefly discuss microeconomics, I'm moving to slide 33 for a quick update on our expected real estate asset set. As you know, and as some of you have noticed when passing bank, we are currently constructing the bank's next headquarters building in Tel Aviv, called Poaling Center. Beyond the financial significance of this move, it will allow us to further align our organizational culture with our future plans, including by bringing all headquarters employees together under one roof, rather than being scattered across several buildings as we are today. The planned relocation will start at the end of this year and we expect to sell existing properties from 2027 onward. As this event is approaching, and we are already progressing with the development of assets and sale processes, we have provided disclosure in the financial statements regarding initial estimates for the expected property from the sale of our main properties, estimated at 800 to 900 billion shekels before tax. Let's now talk briefly about macro situation in Israel. While each reiterate conflict is unique past episodes, offer a useful framework for assessing the current operation's economic impact. We expect a temporary slowdown in activity, broadly similar to the second quarter of 2025 contraction, and dependent mainly on the operation's duration, followed by a partial rebound. The economy entered the year with solid momentum, and assuming the operation remains short, GDP growth is still expected to exceed 4% this year. Shown on the right-hand chart, the checker has strengthened as markets view geopolitical risk as moderating, supported by another strong year in high-tech, including several large acquisitions. Headline inflation has eased to 1.8% year-on-year, partly due to currency operations. Our base case assumes no persistent inflationary impulse from the current operation, keeping near-term inflation contained. The policy rate has been cut to 4%, with inflation expectations well anchored, and market pricing implies roughly three additional cuts by year-end. So, to summarize, 2025 saw very strong performance across all metrics, well above our financial targets. Return on equity was 15.9% or 15.3% adjusted for the income from insurance. Financing income and margins continue to be strong, driven by the growth in activity and assets for all over. The strong growth in credit of 13.4% during 2025 was broad-based across all segments and economic sectors. This was achieved with no compromise on the quality of the book, as reflected in the NPL ratio of only 0.48% and allowance to NPL ratio of 310%. In the fall quarter, we declared on a 50% distribution plus 200 million shekels from existing capital sub-assets, So the overall payout ratio in 2025 was 15%. And lastly, we introduced updated financial targets for 2026 and 2027. 9 to 10 billion shekel net profit. ROE target remains 14 to 15%. Credit growth target base increased to 8 to 9%. And profit is To conclude, we are proud of the strong performance this year and of the clear, ambitious targets we have set for the next two years. We are well positioned to continue delivering substantial fun. We will now be happy to take your questions. So back to you, operator.

Thank you. Ladies and gentlemen, at this time we will begin the question and answer session. In order to send a question, use the check button located at the bottom of your screen. Please type your full name and your company's name before the question. Or use the raise hand button at the bottom of your screen and the option for speaking will be given at the right time. The first question is from David Kaplan. Please go ahead.

Hi, everyone. Good afternoon. I have the first couple questions on the bank's sensitivity to interest rates. You have those tables that you gave at the beginning of the report, and I'd like you to help us understand a little bit why is it that the 1% change in the interest rate has a greater impact on the equity of the bank than it does on the P&O? Start with that.

I'm trying to answer the question. Can you repeat? Maybe I can repeat. We, of course, disclose our interest rate sensitivity. It's around 800 billion shekels. But you refer to the equity side?

Well, yeah, I'm talking about the table that's on page 90 of the report where you talk about an increase or decrease in the interest rate by 1% and the impact it would have on the equity of the bank after tax, right? And it's about a billion shekels, whether it's up or down. But on the table that's just above that, on the same page where you go through the income statement, the impact is much smaller or much different. And so how does that work through the P&L of the bank, and why do we see a greater impact on the equity than we do on the income of the bank?

The important figure here is the 800 million shekels, David. That's the full influence on the bank's stock line and the income. Right. We probably have disclosure on the capital as well, but it's not early. It's a material disclosure.

Okay. I guess the second question I have is on you mentioned in your presentation, and, in fact, it's true that you managed to maintain, first of all, a higher NIM in 2025 than in 2024, which, given the interest rate environment, was already surprising, given what we see, the trends we've seen in other banks in the market here. What is it about your mix of business that allows you to do that?

Now I think it's not the mix of the business, but it's the discipline of the organization and the emphasis that we put on spreads. There are areas that spreads are going down, of course, but we put a lot of value, you know, not only growing the business, but also pricing both the deposit side and the credit side. with the right measurements. Of course, we have a lot of competition around, and we have to deal with that as well, but pricing is very important for our point of view, both deposit and credit side.

David, I'll add to what Yadin said. Well, the main vectors of the NIM globally and here in Israel as well are, you know, the interstate environment, inflation environment and the margins. So what is important to us is to be with the highest NIM in the industry. You can see that we were positioned entering 2026 relative to our peers in our NIM and we want to keep to be in that situation to hold the highest NIM in the industry. Obviously, the impact of changes in the interest rate will affect everyone But like Yadin mentioned, discipline on black pricing and what we did when we repositioned part of our securities portfolio when we sold it in 2025 in extended duration enabled us to maintain relatively stable name during this year compared to 2025. And that's positioned us more favorably looking at the future.

Okay, thanks. And then just one last question on the financial targets that you gave for 26 and 27. Presumably, you're taking into account there the market expectations for inflation and for interest rates. At any point, do you look at it from your internal projections for those things, or do you always look at it from a market perspective? That's the first question. And second of all, if something were to change drastically in expectations or to see rates or inflation, the expectations for rates or inflation change significantly, would you update your targets?

Thank you, David, for that. You know, we spent a lot of time last time on March before we published our 25 and 26 results. And, you know, we have different ideas and discussions internally what will be the right figures to publish. What we decided last time and were consistent with the last year decision is we don't want to play around with any goals or projections of interest rates or inflation because that will make your life much harder in analyzing our profitability. So what we decided was just to take market pricing for both inflation and Bank of India interest rate. Because, you know, we're very sensitive to that, as you, of course, know. So, you know, moving those numbers and taking other figures will make our projections and our targets seem like not eligible enough. Regarding the second part of your question. We don't intend to update on every move of the interest rate, and you can see that we just discussed the sensitivity. There are many metrics that move around, not only interest rates. We feel comfortable with the guidance and the targets that we've published for these two years.

Okay, great. Sorry. I actually do have just one more question. I was looking at the tables towards the back of the report, the volumes versus pricing. And in this current year, volume had a much greater impact on the change in net interest income than did pricing. And I guess that partly had to do with the lower than expected inflation, I guess, over the course of the year. But in comparing it to the change in volume and pricing in the previous year, or there was a much greater split. Can you talk a little bit about how you managed to generate so much income simply off of the volume growth?

The book is growing, and, you know, the balance sheet is growing, so we're making, of course, more profit on a larger balance sheet, and we're balancing it, we're mitigating, we're trying to mitigate where we have pressure from the market in terms of pricing. So that will be like, you know, a normal course of handling the bank, the business.

Okay. And what was the impact here, though, from inflation, or was it minimal?

Can you ask that again, please?

What was the impact of inflation on the change in pricing here when I look at that table, or is it not really a factor?

It's changing pricing.

How does the CPI affect the change in income within pricing?

No. Inflation more or less doesn't change pricing. Okay, you're talking about pricing of the credit spreads?

We can take this offline and discuss it later.

Great. Thank you, David. Thanks for that.

The next question is from John Benning. Please go ahead.

Hey, guys. Thank you for taking my questions. Just one on the cost-to-income ratio. So both the adjusted and the stated cost-to-income ratio came down, I think, quite significantly from last year. I'm just wondering if, going forward, you have a specific cost-to-income ratio in mind. I know you haven't published anything, but I'm just trying to think, obviously capital cost efficiency is an important objective for you. And I'm just trying to think about how far you think that cost income ratio can come down and whether sort of, you know, a secondary question to that is whether any artificial intelligence initiatives you are implementing across the bank can support both the revenue line and also bring costs down.

Thank you, John, for that. Yeah, of course, we have an internal cost to income target or that we follow, both for 26 and 27. We follow and, you know, we have a lot of work. I talked about it in my part and Ram also talked about it. Operational efficiency is a major issue internally. We put a lot of effort to make sure that we're continuing on the right path of making the bank more efficient than it is today. You know, we discussed in previous meetings the efficiency program that we have and the reduction of the number of employees. We believe AI, and I talked about that as well, will have a major impact on the bank. Okay? In terms of the call centers, in terms of the people that write code here, you know, we have a very large technology division, hundreds of people that write code, so this is something that will dramatically affect, you know, AI the way we write code here. We do have different, you know, AI initiatives internally, also within writing code, for example, but, you know, I'm very open at this stage, none at this stage had gone down to the bottom line of the P&L in terms of reducing expenses up to 2025. Looking forward, I'm sure that we will have dramatic changes that will be implemented both in the call centers, both in writing software, changing the way we operate in terms of SLA, regarding how fast we reach our clients. So these will all go down to our cost base. Last part of your question, you asked about the technology expenses. Yes, they are high. We're taking the best engineers in Israel. I think we discussed at the time that we We got in the guy that ran the technical division of Platica. He's running today, since I think March 2025, the IT division within the bank. Building internally new people, new ways of writing software. going faster to market, using AI better, different metrics and know-how that he knew and grew up actually from the gaming industry, which is a very, very sensitive industry in terms of AI and technology. So going back to your question, yes, these will all be impacted. and the V&L of the band looking forward.

Thank you. That makes a lot of sense. And then my second question is just looking at the credit growth target that you've got. So you've got 89% across 26 and 27. I'm just wondering, is there any specific areas of the credit book that you're looking to grow and any areas that you're looking to gain market share and whether that's greater market share in the retail segment or in corporate? Just some kind of on that would be useful. Thank you.

Just like, you know, 2045, we're a very large bank in Israel, you know, more or less 25, 30% market share, depending on different areas that we bank with. So we will sell credit all around, whether it be retail or small businesses or middle market companies or large corporates. We'll be at different sectors. We'll be at an infrastructure in Israel. It will be on real estate, it will be with hotels, so we're all around. There's no specific sector that I think we will say this is where we want to grow because we're very strong on all sectors.

Thank you.

Thank you.

The next question is from David Taranto. Please go ahead.

Good afternoon. This is David Taranto with Bank of America. Thanks for the opportunity. The first question is a follow-up to my colleague's question on efficiency. Could you please elaborate a bit on your existing efficiency plan? Is the program tracking in line with your initial expectations in terms of pace at plant reduction and cost savings, or should we expect any change to the timing or magnitude of the plant savings?

Hi, David. Congratulations for your first call with us, and thank you again for covering the banks in Israel. Cost program, as we said, you know, December 24 financial statements, it's a 770 employee reduction done through four years. starting in 2025. We started to implement it. Our full savings will be realized in 2028. It's called that figure, 300 million shekels. There are no conflicts internally in terms of our internal union. They didn't like the plan too much. So we do have discussions. Discussions have started. They're not concluded yet. I believe we will meet our 770th program on time.

Thank you. And the second question is on the quality. Your coverage ratios are extremely high, and most of the provisioning remains collective. And can you break down how much of the collective allowance reflects management's macro overlay versus what comes purely from credit models? And what would trigger you to release any excess overlays this year?

Yeah, thank you, David, for this question as well. This is something we were very different, you know, 2025 compared with our peers. We thought that 2025 is a year that we should be very conservative in terms of provisions. Even though you will not see within our books any material-specific losses, we thought it would be right to be conservative and to continue to accumulate more credit provisions. We did that through the year and also Q4 2025. Looking forward, we think, and I mentioned that when I talked about entering 26 and 27, we think that this is one of our key strengths looking forward. Because if we are right, and Israel is going on the right track in terms of the geopolitical situation, in terms of the growth of the economy, in terms of things going back to normal in Israel, we have high reserves that we hope we will be able to release. But this is, you know, looking forward, and we will manage to force during 26th and 27th.

David, if I can add to what Yadid said and elaborate, So, we implement the system methodology on provisioning on valid losses. And overall, we run, let's say, three scenarios. So, and we waste those three scenarios into a combination. They have a baseline scenario, pessimistic and optimistic. By the way, the reality is better than the optimistic scenario, actually. So, it's hard to separate the elements that you mentioned, because The actual figures are a combination of these three scenarios, adding to that some qualitative elements that we put to reflect uncertainty. But I think you can get a figure to what you asked. If you look at our coverage ratio, standing at 1.72%, and compare it, let's say, to our peers, you see that we have, let's say, roughly 30 basis points up to the average, so that can roughly reflect our conservative approach, hopefully to meet the positive and optimistic scenario.

That's clear, thank you. And two more, please. The first one, on the expected pre-tax real estate gains, should we assume standard corporate income tax on these proceeds? And will the regulator allow this profit to flow into the regular payout calculation, or should we expect it to be treated separately in terms of payout?

Yes. Usually it's the regular, but we may have from time to time some losses to offset from that. We don't know exactly what will be the final outcome for that. That's the reason why we disclosed the let's say, the before tax estimates. Obviously, if we will have some losses to deduct from that, then it doesn't matter whether it's included in the tax, let's say, the super tax or not. But if there won't be any, let's say, deductible losses, then generally speaking, it's included in the super tax as well.

And the last one is on the AFS book. You have a strong unrealized gain position in your AFS book. And if the rates continue to come down, this position should build up further. Can you give us more color on the portfolio structure in particular? What share of the AFS book is in fixed rate securities? And how sensitive the unrealized gains are to, let's say, 50 bps lower yields?

We have a disclosure on our book. We can direct you later on on the sensitivity for 1% change on our fair value and equity. The overall effect, but part of it is from the AFS, is the overall effect is about 1 billion, but the available fossil is only part of it. So I can direct you to our disclosure on that, page 19 in our statements.

All right. Thank you very much. That's all from my end. Thank you.

The next question is from Chris Reimer. What is driving your confidence around the increased loan growth target and given the potential for further leveraging of technology, do you see a case for further year-on-year decline in expenses?

Thank you for that. We feel the strength of the market and that's why we thought it would be right to increase our credit target, credit growth target. We saw the strength of the market in 24 and then in 25. We see the pipeline of the different projects that were handling both infrastructure and others. Even before the Iran war now, the growth in Israel and the projections were very high. And after the war, once it ends, we're sure that Israel is going to be in a new era in terms of the geopolitical environment. So that gives us a lot of comfort regarding the credit book. The second part of the question in terms of the technology, I think I answered it before. Yes, we're spending a lot of money on IT and technology, but we also see that in different areas, the IT costs may go down because of different infrastructure that will be used here through AI, for example. This is not, as I said, not right for 2025, but looking forward, This might be material. We're trying to manage both costs, or actually three different costs. The employee's cost, the technology cost, and all our other costs.

The next question is from Valentina Stoikova of Barclays. Given ongoing lion's roar, I was wondering whether you could briefly outline the best and worst-case stress scenarios for Apoalim and the key macro assumptions used. Where do you see your COR in a worst-case scenario? And also, should we think about the upcoming Tier 2 callable option? And as a follow-up, could you outline the main risks you see to delivering on the ROE target?

Great. Thank you for that. Good question. Actually, I believe that whatever happens, Israel is going to get out of this war dramatically stronger than from the position we were 10 days ago. And that is mainly because the whole geopolitical year may change, air environment may change. It goes back to the fact that a very aggressive country is already in a different position. It goes down to different agreements with our Arab neighbors that we've been talking for years about extending, for example, the Abraham Accords. So this might happen as well. So whatever happens, I think Israel is going to be a much stronger country and a much stronger economy looking forward. And that, of course, reflects on the back. The two, you know, you asked about the two, the best case scenario and the worst case scenario, and maybe I'll think out loud. The best case scenario will be a very short war, just like the 12 days war, ending with a new regime in Iran, and having Abraham Accords with all the Arab countries around, including Iran. That's like the best case scenario. The worst case scenario is a long war that is taking a long time. I don't think that will happen, but it might happen. And that will, of course, influence government and businesses in Israel. I don't think this option is really relevant, but if you're looking for... for something which is extreme, that may happen. Reflections on the army, you know, can change on different scenarios. But, you know, personally, I'm very optimistic because I think that the essence of the Mediterranean is really changing day by day over the last week.

Yes, and if you read what Yadin said, Valentina, you asked about the cost of risk and the effects. So we have a disclosure in page A1 of the financial report. Like I mentioned before, while calculating the collective allowance, we are using different scenarios, pessimistic-based scenario and optimistic, and we created some combination of that. So we have disclosure there. If we work only by the pessimistic scenario, What will be the additional effect on the provision? And if we work only according to the optimistic scenario, what will be the decrease in the provision? So we do have full disclosure there. And like I mentioned before, what we saw after 2025 and the first campaign with Iran is actually that the reality was better even than the optimistic scenarios that we ran.

There are no further questions at this time. This concludes the Bank of Wallim fourth quarter and full year 2025 results conference call. Thank you for your participation. You may go ahead and disconnect.