Ladies and gentlemen, thank you for standing by. Welcome to the Banco Hapoalim second quarter of 2026 results conference call webinar. For your convenience, this call will be accompanied by a presentation. May we suggest, if you have not yet done so, that you access the presentation on the Bank's website www.BancoHapoalim.com by clicking on financial information on the homepage and then click on the second quarter 2026 report presentation. All participants are as present in listen-only mode. Following management's formal presentation, we will open the question and answer session. You may send questions via chat. Please type your name and company before your questions. Or you can use the raise hand button on the bottom of your screen. As a reminder, this conference is being recorded August 11, 2026. With us on the line today are Mr. Ram Gev, CFO, and Mr. Mark Koblenz, Head of Investor Relations. I would like to remind everyone that forward-looking statements for the respected company's business, financial condition and results of its operations are subject to risk and uncertainties that would 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 securities authorities. Mr. Gev, would you like to begin?

Good afternoon to you all and thank you for joining us today. I'm pleased to review the Bank's 2026 second quarter and first half results. Let's start with the highlights of slide 3. We delivered an excellent This brought our first hard return on equity to a strong 14%, or roughly 15.4%, excluding the special bank tax, reflecting continued strong business momentum, cost restraints, and of course, the positive impact The last point to highlight is capital. Alongside our continuous growth, we remain committed to distributing a meaningful portion of our earnings with a 50% payout ratio, generating an attractive dividend yield while maintaining strong capital ratios. Net profit in the quarter stood at 2.5 billion shekels, a 17.1% increase for our board, adding the share is up to 1.9 shekels. ROE for the past two quarters have been affected by the special tax. which on an annual basis will have a 1.3 to 1.4% impact on ROE terms. Next, let's talk about our credit book. Total credit with a balance of 536 billion shekels grew impressively by 14.3% in the last 12 months, of which 3.3% in the last quarter. Growth was diversified across all segments and in various economic sectors. This reflects the strength and unique characteristics of the Israeli economy, which continues to expand and develop despite ongoing security and other challenges. It also demonstrates a continued confidence of Israeli households and businesses in the long-term prospects of the Israeli economy. Alongside continued growth in retail trades, mortgages, and mid-market lending, we saw strong growth in our corporate credit portfolio. A portion of this growth consists of balances attributed to securities lending and derivatives transactions. Slide 7 presents our financing income. Income from regular financing activities grew 13.7% for our report. mainly due to high contribution of 431 million shekel of the CPI in the quarter, as well as the growth in banking activity, including lending, deposits, and dealing rooms. Scrolling the CPI, income from regular financial activity grew 3.4%. Impacted growth was achieved despite a headwind from lower interest rates. With the average Bank of Israel rate during the quarter being 11 basis points lower than in the previous quarter. For non-regular financing activity, we recorded a high income of 325 billion shekels, mainly thanks to income from shares derived by our nostro investments as well as Hualim Equity, our investment platform. The financial margin remains a key strength of the Bank It is substantially up from 2.49% to 2.70%, affected mostly by the CPI, while being adversely affected by the aforementioned rate cuts and lower credit marches. The positive trend continues as our business activity continues to expand. Fees grew 2.7% in the quarter and stayed unchanged versus the corresponding quarter last year. As in the second quarter of 2025, we recorded special income from the international credit card companies. The growth in fees in the second quarter was recorded mostly in credit card securities and corporation differences. Moving on to present our discipline, cost management. The benefits of our continued expense management efforts are clearly evident in these quarter results. Expenses stayed flat quarter-on-quarter and were down 4.4% versus the second quarter last year. This decrease is mainly attributable to salary expenses which were down 7.3% year-on-year, mainly due to a decrease in performance-based costs. Underlying salary expenses stayed stable. The cost-income ratio is down to 30.6%, 33.3% for the first half. Moving on to discuss provision for credit losses and the quality of our book on slide 10 and 11. Provision for credit losses, or cost of risk, amounted to 298 million shekels, a 0.22% ratio. We recorded a collective provision that primarily protected portfolio growth and other standard provisioning effects. As uncertainty still resists. On the individual side, there were no exceptional recoveries during the quarter. Other results as shown on slide number 11, while the allowance balance increased in absolute terms, the allowance ratio actually declined slightly to 1.65%. On the left-hand side, we see the NPLs marginally increasing this quarter, but still at a very low level of 0.5%. This change primarily reflects normal quarter-to-quarter variations related to routine classifications. Against the NPL balance, our allowance coverage remains robust at close to 3 times, providing a significant caution. On slide 12, our deposit base continued to grow by 2.5% in the last quarter and 7.1% in the last 12 months. Return deposits decreased slightly due to customer preferences to move funds to capital markets products, but still represent 52% of total deposits. The credit union ratios LCR and NSFR continue to be well above the minimum required. Now let's move on to present our capital position. On slacks of 13, shareholders' equity grew by 8.1% in the last 12 months, and the CT1 capital ratio is 11.83% versus a mean internal target of 11%. On the left-hand side, you see the CT1 ratio development. The bank continues to demonstrate strong organic capital generation, alongside the effects of forecast growth and a high payout ratio, which led to a decrease in the capital ratio and a reduction in capital profits. Total distribution continues to be high at 50% of net profit, being 1.2 billion shekel in respect of the second quarter, of which 995 billion shekel in cash dividends, or 0.36 shekel per share. The remaining amount is the buyback of shares The 20% of the total distribution. Slide 15 Bits Our unique financial app has gained 3.5 million active customers. Two-thirds of them conduct their primary banking activity with other banks. B2B transaction volume continues to grow, outstanding at 2.9 billion shekels per month. On slide 16 Our future headquarters, Hualim Center, construction is progressing and we are simultaneously advancing, facilitating and selling the current properties. Before we conclude, a quick reminder of our financial targets and a brief micro-update. For 2026, we are targeting net profits in the range of 8.5 to 9.5 billion chequered with return on equity between 13 to 14%. Looking ahead to next year, we return to our original productivity target of 14 to 15%, with net profits increasing to 9.5 to 10.5 billion shekels. Across both years, we are planning growth of 8 to 9% on average, and we continue to target a balance ratio of 50 to 60%. The underlying assumptions, including the impacts of the special bank tax, Our outline in slide 18. On the macroeconomic environment, even though the contraction in economic activity in the first quarter was moderate, we witnessed a major rebound in the second quarter in almost all sectors, exports, private consumption, and investments. The labor market is tight, and the broadening of growth probably relies on improved productivity. Inflation, besides rain, was affected by the strength, the shaker, and its year-on-year level decreased to 1.6%. Markets now blind at 25 basis points rate cuts for this year, and some probability for one more cut next year. The worldwide steepening in yield curves ticked Israel, and the 10-year bond is trading 8 basis points below So, to summarize, we are concluding a strong second quarter with robust profitability and continuous business momentum. ROE was 15%, roughly 16.4%, excluding the impact of special bank tax. This quarter, ROE was actually above our target over the year. We delivered strong growth both this quarter and over the past year, while maintaining very low NPLs. Financing income and margin were boosted by the CPI as well as activity growth mitigated by lower interest rates. Expenses continued to be well controlled, supporting an efficiency ratio in the low 30s. And we returned 50% of net profit to shareholders through cash dividends and buybacks. With that, we will now open the call for your questions. Thank you.

Thank you. Ladies and gentlemen, at this time we will begin the question and answer session. In order to send the 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, this quarter you provided 0.22% cost of risk following the first quarter in which credit loss expenses were very low. Can you walk us through what drove the increase and looking ahead when we can expect some provision release?

Okay, thank you for the question.

The bank has a high-quality credit portfolio, as reflected across all key asset quality indicators. And at the same time, we built a meaningful reserve buffer throughout the war period as a prudent measure, given the elevated uncertainty. And in fact, compared to peers, we currently maintain the highest reserve ratio in the sector, which positions FACPOLI well across different and many others. Credit loss expenses for the quarter were 22 base points which reflects a level without exceptional effects. I mean, there was no material reserve relief or recovery during the quarter, nor did we build any significant additional reserves. So the expense level primarily reflects the underlying quality of the credit portfolio including ongoing net charges as well as portfolio growth. As you know, as the portfolio expands, the collective provision naturally grows as well and impacts the quarterly expense line. I think it's also worth noting that the banks delivered a strong 15% return on everything this quarter despite Maintaining this conservative regime approach. Looking ahead, it's hard to say what will be the reverse methodology or whether it will happen, because it depends on the circumstances and conditions, economic and geopolitical, as long as the situation will be stabilized. We will consider that, but it's early to say.

The next question. Expenses were down versus the same quarter last year and broadly flat quarter over quarter. What drove that? And should we expect further improvements going forward?

Expenses is an important item for us, and expenses declined by 4.4% versus the same quarter last year, and they were essentially stable compared to the previous quarter. The main driver of the year-over-year decline was salary expenses, which decreased by 7.3%, primarily due to lower performance-based compensation. While base salary expenses remain broadly stable and reflect our ongoing efforts to control underlying salary costs, even while growing the business and taking into account labor cost inflation in Israel. In addition, during the previous quarter, we implemented an actuarial adjustment related to the transition to severance-based retirement model, which is expected to reduce accrual expenses by several tens of millions of shekels annually. And beyond that, the results reflect disciplined management of ongoing salary costs, including retirement and promotions, as well as efficiency measures that we take across a broad range of all the other operating expenses. Looking ahead, these efficiency efforts will continue. We also remind that the early retirement program, which was announced at the end of 2024, is expected to generate the annual savings of approximately 300 million shekels, compared with the 2024

The next question. Credit growth has already reached 7% year-to-date, putting you close to the lower end of your 8-9% full-year time. Given the momentum you've seen, should investors interpret the current guidance as prudently conservative, or do you expect growth to slow meaningfully in the second half of the year?

Hi, thank you for this question. Profit is a very important element. The bank operates across a broad range of segments and our credit portfolio as well as our growth profile is well diversified. So growth this quarter reflected the expansion across retail lending, mortgages, middle market and corporate banking. Naturally, Naturally, these trends are influenced by demand patterns in the Israeli economy, infrastructure, real estate, financial services, and broader capital market activity across various financial products. The growth is significant for the first half of the year. We have our targets of the items that we publish and we talked about 8-9% growth. The figures for the first half certainly give us very good feedback for our strategy and confidence in achieving our targets. It's important to remember that we are still at the middle of the year and it is important to us not only the growth but balancing between growth, profitability and not only working, but only on growth. So, in short, it's giving us a good feedback on our strategy and very good confidence with our initial guidance. Obviously, we are not usually updating during the year our guidance, but like we did at the beginning of this year, I assume that at the end of the year, when we see our actual growth, And compared to the guidance we gave, we will consider updating guidance for the next year as long as we receive this content.

The next question. Congratulations on the results. My question is mainly on the impact of the war on your equity and asset quality metrics. Have you used any RECO facilities with the central bank also? Where are you seeing the most pressure on asset quality in Q2? And what can you share on trends so far in Q3 across sectors of customer segments?

For the question, the answer is so. We have a very huge liquidity phase. We don't see any effect of the war. We have a well-diversified funding base. We actually have the largest We can deposit based in Israel with a strong liquidity, LCR stood at 126%. As for the impact of the war on credit quality, so as you know, the Israeli economy performs very good, or performs well during the war. Actually, we are almost three years in kind of a war situation. The economy performs well, obviously. The war has an impact on the economy, deficit, etc. that the government and others will have to handle. But we don't see material impact on credit quality. The numbers and the figures of the credit quality are very, very good. Historical Law, you can see the NPLs. And nevertheless, we built along the war reserves. Actually, we have the highest allowance to credit ratio in this sector, reflecting our prudent approach. That positioned us in a very good position to any scenario, positive or negative. But we don't see material impact on a specific element. Obviously, there are some sectors that are more sensitive to a worse situation, but we don't see a material effect, like I mentioned.

The next question. How do you see MIM developing from here, given that the market is implying further policy rate cuts? Should we expect MIM Can you share your NIM level expectation for FY26?

Okay, thank you. NIM is another important element. Obviously, NIM is affected by different vectors, and the final outcome depends on the materiality of every effect. First, we have the inflation CPI. was affected by relatively high CPI, and we see it clearly on the NIMS. Another factor that occurs on the NIMS is a change in the interest rate. We have a change of quarter to quarter that creates a negative effect on the NIMS, and obviously competitive pressure that we see in different sales. Nevertheless, we are putting a lot of efforts to manage the name in a very good way, so position the banks relatively in a very good position compared to our peers. So actually, if you look at the numbers, we have the highest name in the sector, and we want to, let's say, The next question, do you concern lately regarding

The deterioration situation at the residential market.

Can you repeat the question?

Do you concern lately regarding deterioration situation at the residential market?

Yes. So we have Victor, our chief economist with us.

Can you take this question? Yes, sure, thanks Ram. Well, in the housing market, I think that over the last year we see a decrease in the transaction level, something like 35,000 units per year, while the housing stock is much higher than that, maybe close to more like 80,000 per year, which means there is a gap between the supply and the demand side. And we see that some accumulation of stock of unsold apartments. Well, the question is whether we are concerned or not. I think that the level of stocks is not so high compared to the demographic trends in Israel. Even though we see that some demographic changes in the Israeli society, we still see that there is growing population of something like 1.5% per year. which means that if we take the stock of unsold apartments, 85,000 units, maybe it's stock enough for two years, not much more than that. So in terms of the demographic changes of the Israeli population, I wouldn't say that we are concerned. You see, there are much people waiting on the fence. They are looking for the interest rate to decline. They are waiting for the political situation to be maybe more clear. I think that next year maybe we will see some political stability together with some decline in interest rate. All these people waiting on defense might return to the housing market and the level of unsold apartments doesn't look so high in our perspective. The question is, again, if crisis can further decline, I would say it's even reasonable that we might see a further decline in crisis In the next 12 months, but I think it would be a very moderate one.

The next question. How comfortable are you with your current CET1 and total capital ratios and buffers, given the ongoing geopolitical uncertainty? You have tier 2 instruments callable in October. Could you share your approach? Hi, thank you. I believe that the first element

About, let's say, CC1 capital ratio. The bank has a very strong capital and very good capital ratio. We ended the quarter with 11.83% while the regular room regulatory requirement is 10.23% and internal auto director's target is 11%. So we are in a very good position with sufficient buffers. The way we look at that is we want the capital to serve growth and distribution like we mentioned in our guidance, and at the same time maintain buffers for defense scenarios. So we feel very comfortable with our T1 capital ratio. It's important to note that we implemented standard items. which is very very conservative in capital management. As for the tier 2 instruments and the core option, obviously I cannot relate to future core options or what will be our decision, but I can say a few things. First, our great great course is that we exercise all options. Second, We understand, let's say, investors or market expectations. But third, the decision will be taken when we need and we consider all the elements, obviously the economic elements.

There are no further questions at this time. This concludes the Bank Hapoalim second quarter 2026 results conference call. Thank you for your participation. You may go ahead and disconnect.