IBI Underwriting 2025: The market is back, but too much of the profit still sits outside fees

Introduction to the Company

IBI Underwriting is not a broad financial platform. It is a relatively small underwriting house whose economics still move with the pulse of the Israeli capital market. The real business here is underwriting, distribution, offering management and securities brokerage, run through a 15 person team and backed by a balance sheet that allows the company to take underwriting commitments, buy securities in transactions it leads, and stay close to institutional investors.

What clearly worked in 2025 worked very well. Revenue from operations rose to NIS 67.2 million from NIS 36.8 million in 2024. Revenue from public underwriting services jumped to NIS 23.7 million from just NIS 4.1 million a year earlier, and the company benefited from 8 transactions in which it actually took underwriting commitments. At the same time, the equity market reopened, and the company was involved in 22 equity deals that raised about NIS 5.4 billion.

But a superficial reading of the year misses the real point. Net profit for 2025, NIS 46.6 million, was not built from fees alone. Alongside the genuine improvement in core activity, the company also recorded NIS 29.2 million of gains from long term investments, NIS 5.2 million of gains from securities purchased in connection with underwriting activity, and another NIS 3.3 million of one time gain from the sale of Headstart. Taken together, those items account for about 60% of pre tax profit. That does not cancel the recovery in underwriting, but it does mean that the real question for 2026 is how much of 2025 profit actually repeats.

The active bottleneck is not leverage, because the company has no bank or bond debt, but earnings quality and capital allocation. In 2025 the company paid out NIS 64 million through dividends and capital reduction while long term investments rose to NIS 95.7 million. As of April 6, 2026 the share traded at NIS 13.11 on about 31.1 million shares, implying a market value of roughly NIS 408 million, but on daily turnover of only about NIS 113 thousand. This is a business with a strong balance sheet, but also with low liquidity in the stock and with earnings that are less clean than the headline suggests.

What matters upfront

• First finding: underwriting really did come back, especially in equity deals and guaranteed mandates.
• Second finding: more than half of pre tax profit relied on revaluation, trading inventory and a one time gain, not only on fees.
• Third finding: the balance sheet is still strong, but a meaningful part of liquidity moved away from deposits and short bonds toward long term assets and capital returns.
• Fourth finding: this is still a very small, people driven business whose edge depends on institutional relationships and on using the balance sheet as a competitive tool.

Economic map in one view

Events and Triggers

The first trigger: the market reopened. In 2025, 21 new companies listed and raised about NIS 5.5 billion, while total equity issuance in the local market reached about NIS 20.5 billion, up roughly 150% from 2024. That is the backdrop that brought IBI Underwriting back to the part of the market where fee economics are usually better.

The second trigger: the company translated a better market into better quality revenue, not just more volume. Out of 103 transactions it was involved in during 2025, clients raised about NIS 36.8 billion, and in 8 deals totaling about NIS 3.1 billion the company took underwriting commitments and generated around NIS 23.7 million of revenue. About half of that came from one deal. That is a strong number, but it is also concentrated.

The third trigger: Manor Evergreen became a central earnings contributor rather than a side option. The company had invested NIS 46.1 million in the fund by year end 2025, but carried it at NIS 79.3 million after a NIS 29.6 million fair value gain. The mid year move to Level 2 valuation, based on quarterly NAV and quarterly investor entry and exit, improved the accounting readability of the number. It did not make the investment economically liquid in any immediate sense.

The fourth trigger: after the balance sheet date, the company kept pulling cash out. On March 18, 2026 the board approved another NIS 14.4 million dividend out of fourth quarter 2025 profit. That signals confidence, but it also leaves less room for error if 2026 turns out to be more moderate.

Efficiency, Profitability and Competition

The main analytical point is that 2025 improved first through mix. In 2024 the company still relied mainly on marketing and distribution work, meaning lower risk and lower fee intensity. In 2025, public underwriting services already represented 35.2% of operating revenue, versus just 11.2% a year earlier. That means the company did not only enjoy more transactions, it returned to the part of the business where it actually earns a meaningful underwriting premium.

The other side is that the industry did not suddenly become comfortable. The company explicitly says fee levels on guaranteed transactions have fallen by about 10% to 20% over the last two years. So the 2025 improvement did not come from unusual pricing power. It came from a stronger market and from a higher number of transactions where underwriting risk could actually be monetized. If the market cools, fees will not protect it.

Earnings quality also needs to be separated properly. Profit from ordinary activities rose to NIS 54.9 million, but that line already includes investment gains and trading inventory gains. Without NIS 29.2 million from long term investments, without NIS 5.2 million from securities purchased in connection with underwriting, and without NIS 3.3 million from Headstart, pre tax profit would look very different. Anyone trying to build a new earnings base for the company has to separate the fee engine from the mark to market engine first.

It also matters who gets paid for the improvement. General and administrative expenses rose to NIS 44.7 million from NIS 25.5 million in 2024. Of that, salary and related expenses alone were NIS 37.0 million. Employee compensation liabilities rose to NIS 23.6 million, including NIS 5.3 million of long term bonus payable. Each of the three senior executives received a NIS 2.5 million annual bonus, and together they also hold Class B economics in the underwriting subsidiary that entitle them to 15% of any distribution from that entity. That makes sense in a people business, but it also means part of the upside leaves before common shareholders see it.

Client concentration is also not negligible. Seven transactions for six clients accounted for about 45% of operating revenue in 2025, and one client alone represented about 19% of the year. This is still more diversified than a one asset company, but it is not a model where 100 transactions necessarily mean 100 economically important clients.

Cash Flow, Debt and Capital Structure

The framing here is all-in cash flexibility. In other words, the question is not how much profit the company recorded, but how much cash remained after actual uses of cash.

Cash flow from operations reached NIS 33.3 million in 2025. That is a solid number, but by itself it does not explain the year’s capital allocation. The company spent NIS 15.8 million on investing activities, including NIS 28.2 million of long term investment purchases partly offset by NIS 14.25 million of net realization from short term investments. On the financing side, it used NIS 64.8 million, mainly NIS 39 million of dividends, NIS 25 million of capital reduction, and NIS 0.8 million of lease payments.

As a result, cash and cash equivalents fell by NIS 47.4 million, from NIS 89.6 million to NIS 42.2 million. If cash and short term investments are combined, the company moved from NIS 160.1 million to NIS 107.8 million. At the same time, long term investments climbed from NIS 40.4 million to NIS 95.7 million. This was not just a year of surplus cash returns. It was a real reallocation of the balance sheet away from high liquidity and toward longer duration assets.

Still, the balance sheet is nowhere near stress. Equity stands at NIS 182.2 million, about 82% of total assets, and neither the company nor its subsidiary has debt to banks or public bondholders. As of December 31, 2025 there were also no open underwriting commitments. That is a real competitive advantage in this sector because it allows the platform to support larger transactions and warehouse paper when needed.

But it would be wrong to treat all NIS 107.8 million as excess distributable capital. The company ended the year with NIS 19.7 million invested in securities purchased in connection with underwriting and distribution activity, and NIS 63.6 million of corporate bond exposure. In addition, a large part of the long term portfolio sits in relatively illiquid assets, led by Manor. In other words, the balance sheet works for the business. It does not simply sit on the side.

Outlook

Four things to watch before the next reports

• First: 2025 was a true underwriting recovery year, but not a clean earnings year.
• Second: the NIS 23.7 million of guaranteed underwriting revenue was built on only 8 deals, and about half came from one transaction.
• Third: Manor’s move to Level 2 improved accounting visibility, not economic liquidity.
• Fourth: 2026 already started with another NIS 14.4 million dividend, so aggressive capital return did not stop at year end.

For those reasons, 2026 looks like a proof year. For the market to upgrade its reading of the company, it needs to see that core fee income can remain strong even without unusually large revaluation gains, and that the equity issuance rebound was not a one off market event. The fourth quarter already showed an interesting base, with revenue from operations at NIS 16.7 million versus NIS 9.2 million in the comparable quarter, and profit from ordinary activities at NIS 19.2 million versus NIS 7.4 million. But even that strong quarter still included NIS 13.9 million of long term investment gains, so the quarter was not clean either.

The clear positive trigger is a continued open equity market. The company showed that it can translate a strong market into real profit, especially when guaranteed underwriting is involved. If over the next 2 to 4 quarters it continues to appear in a reasonable number of those transactions without loading too much securities inventory onto the balance sheet, the market can start to believe the operating earnings floor has moved higher.

The main friction is that the company is running three legitimate but competing uses of capital at the same time: aggressive capital returns, long term strategic investing such as Manor, and preserving a liquid balance sheet that supports underwriting and distribution activity. As long as the market stays supportive, that tension is manageable. If the year turns more ordinary, the question of which use gets priority becomes much sharper.

It is also important to keep the side projects in proportion. The structured products venture had already issued six series totaling about NIS 4.78 billion by the report date, but at the end of 2025 the carrying value to the group was still negative NIS 1.4 million. The US marketing vehicle also carried negative value of NIS 0.5 million, and the Bridgewise agreement stood at NIS 1.8 million invested by year end. For now these are side options, not value drivers that should explain the stock.

Risks

The first risk is sharp capital markets cyclicality. The company itself classifies dependence on capital markets conditions as a high impact risk. That is intuitive. When equity issuance freezes, transactions disappear, competition for each mandate intensifies, and fee rates compress.

The second risk is misjudging underwriting and inventory risk. At year end there were no open underwriting commitments, but that is only a year end snapshot, not the economics of the full year. The company explicitly states that as guaranteed transaction volume grows, so does the risk of ending up with securities on the books and taking losses if the market turns.

The third risk is human capital concentration. The company employs only 15 people, and the filing explicitly references the 2017 management departure as an example of the damage turnover can cause. That explains the rich incentive structure, but it also means the business depends on continuing to pay up.

The fourth risk is that revaluation becomes cash much more slowly than it becomes accounting profit. Manor allows anchor investors to redeem only after 7 years. Even if NAV is reported quarterly, and even if the fair value is now more observable, a meaningful part of capital remains locked for a long time.

The fifth risk is regulatory and insurance pressure. In 2025 the company bought professional liability coverage of NIS 40 million with a NIS 913 thousand deductible, and explicitly said insurance costs are already materially higher than they were before 2021 with no assurance that the next renewal in October 2026 will not become more expensive again. That is a useful external warning signal because it reflects the litigation and regulatory environment in which an underwriter operates, not only management’s internal framing.

Conclusions

IBI Underwriting finished 2025 with a stronger core business, a more supportive market, and a balance sheet that still gives it real competitive leverage. The main blocker is that reported profit was also colored by revaluation gains, inventory gains and aggressive capital returns. In the short to medium term, the market will test whether 2026 continues the fee strength of 2025, or simply reveals how much last year depended on an unusually strong market and on non core profit lines.

Current thesis: IBI Underwriting benefited from a real recovery in underwriting during 2025, but the recurring earnings base is still lower than the reported bottom line.

What changed: versus 2024 the company moved from a model driven mainly by marketing and distribution fees to one that once again earned real underwriting revenue, while at the same time increasing the weight of the investment portfolio and capital returns.

Counter thesis: one could argue that the reopening of the equity market and the jump in guaranteed deals are strong enough to reset the company’s revenue base, so even without repeating all of the revaluation gains it still sits on a meaningfully higher earnings platform.

What could change the market reading in the near to medium term: a continued flow of profitable equity and underwriting mandates would strengthen the thesis, while slower deal volume combined with continued payouts and more long term investing would sharpen concern over earnings quality.

Why this matters: this is a small, highly cyclical business where earnings quality and capital allocation matter almost as much as issuance volume itself.

What must happen over the next 2 to 4 quarters: the company needs to show that fees remain strong even without unusually large revaluation gains, keep securities inventory under control, and avoid draining too much liquidity through simultaneous capital returns and long term investments. What would weaken the thesis is a softer market, a weaker guaranteed deal mix, and continued aggressive cash extraction from the balance sheet.