Phoenix Gamma Follow-Up: How Much Of 2025 Profit Really Recurs Without The Club Associate
Phoenix Gamma reported NIS 183.6 million of net profit in 2025, but NIS 60.1 million of that came from the club associate. The filing split shows that about NIS 23.6 million of this contribution was one-off, so the profit base without the associate is materially lower than the headline year.
The main Phoenix Gamma article argued that 2025 was a real step up, but not a clean one. This follow-up isolates just one question: how much of 2025 profit really belongs to Gamma’s own recurring earnings base, and how much came from the club associate in a form that may not repeat at the same level.
The short answer is fairly blunt. Net profit was NIS 183.6 million, but NIS 60.1 million of that was recognized through the company’s share of profit from the club associate. Inside that NIS 60.1 million, only NIS 36.5 million reflects Gamma’s share in the club’s total profit. Roughly NIS 23.6 million more came from a one-off equity item at the club, tied to the derecognition of an option granted under a financing agreement. So anyone reading the full NIS 60.1 million as a new recurring annual earnings layer is reading the wrong line.
Bottom line: if the club associate is stripped out entirely, 2025 net profit falls to NIS 123.5 million. If only the net one-off effect flagged by the company is stripped out, profit falls to NIS 160.9 million. That is still a good year, but it is no longer the same headline.
What Is Actually Inside The NIS 60.1 Million
The first number readers see is NIS 60.1 million. That is the line recognized in the income statement as Gamma’s share in profit from an associate. But the note on material holdings does something more useful than the headline. It separates the company’s share in the club’s total profit, which was NIS 36.5 million, from the total equity-method profit recognized from the associate, which was NIS 60.1 million.
The gap between those two figures, about NIS 23.6 million, is not some hidden operating improvement. It comes from changes in the club’s net assets that were recorded directly in equity. The adjusted-profit table points in the same direction and identifies a one-off gain of NIS 23.574 million from the company’s share in the club’s profits, offset by a one-off expense of NIS 0.847 million from an investment impairment. In Gamma’s own net-profit line, that means a net one-off effect of NIS 22.727 million entered 2025.
This is not a technical distinction. It is the core issue. Once it is clear that the NIS 60.1 million includes a one-off equity item, the whole contribution can no longer be treated as though it were a normal recurring earnings layer generated by the club’s regular business or by Gamma’s core lending engine.
| Earnings layer | NIS m | Share of net profit | What it means |
|---|---|---|---|
| Reported net profit | 183.629 | 100% | The headline year as reported |
| Club contribution under the equity method | 60.127 | 32.7% | A very material support to annual earnings |
| Of which: share in the club's total profit | 36.543 | 19.9% | The more recurring piece of the associate contribution |
| Of which: equity item above total profit | 23.584 | 12.8% | The piece that should not be read as a normal profit base |
| Net profit without the club associate | 123.502 | 67.3% | What remains if the associate is removed entirely |
| Net profit after removing the net one-off effect | 160.902 | 87.6% | What remains if only the net one-off effect is stripped out |
The last two rows matter because they give two different degrees of severity. The harder read says that without the associate, 2025 was a NIS 123.5 million profit year. The softer read says that even if the associate remains part of the story, at least NIS 22.7 million should come off the headline because it was a net one-off effect. Under either read, NIS 183.6 million is not a figure that automatically recurs.
Why This Cannot Be Dismissed As A Timing Distortion
At first glance, one could argue that the jump mainly reflects the fact that the club stake was transferred into Gamma only on March 31, 2025. That is a convenient explanation, but still the wrong one. The note on the transfer states that the investment was presented under pooling-of-interests accounting on an “as if always owned” basis. In plain terms, the comparison periods were restated as if the investment had already sat inside Gamma from the earlier point at which Phoenix Finance held it.
So the move from NIS 3.6 million in 2024 to NIS 60.1 million in 2025 is not just a story of nine months of ownership versus a full year. The statements themselves already remove much of that timing debate through the restatement. That is exactly why the split between NIS 36.5 million of total-profit share and NIS 60.1 million of recognized equity-method income matters so much. It shows that the gap is not only about group structure. It is also about the quality of earnings that entered 2025.
That point gets stronger in the note on material associates. There, the company explains that the club’s full financial statements were not attached even though the amount recognized in the income statement exceeded 20% of Gamma’s net profit in 2025, because it is not expected that the amount included next year will again exceed 20% of the company’s net profit. That does not mean the contribution disappears. It does mean that the 2025 outsize weight is not being framed as the new base case.
What May Recur In 2026, And What Probably Will Not
It helps to separate two different questions. The first is whether the club can continue contributing to Gamma in 2026. On that point, the answer is likely yes. Midroog’s follow-up report explicitly says that the frequent-flyer club holding is expected to continue generating an additional income source for the company. That matters because it means the associate contribution is not pure one-off noise.
The second question, and the more important one, is whether the full NIS 60.1 million from 2025 can simply be rolled forward. Here the answer is much more negative. The same rating report does not build its base case around a dramatic profitability reset. Instead, it assumes net profit to average managed assets of 2.6% to 2.8% in 2025 to 2026, while still describing the company’s profitability as low relative to the rating. In other words, even for a rating agency that follows the group structure closely, the club is an additional earnings source, not the engine that resolves the underlying earnings-quality debate.
That leads to a cleaner reading of 2025:
- The more recurring part of the club contribution looks closer to NIS 36.5 million than to NIS 60.1 million.
- The one-off component of roughly NIS 23.6 million is tied to an equity event at the club, not to the associate’s ordinary total profit and not to a new direct operating line inside Gamma.
- The implication for Gamma is that 2025 was good, but part of that goodness came from a place that should not be projected forward in the same way into 2026.
So How Much Profit Really Recurs Without The Associate
If the question is framed strictly, with the club removed altogether, Gamma is left with NIS 123.5 million of net profit in 2025. That is still meaningful and shows the business was not “invented” by the associate. But it also means that almost one-third of reported profit came from a source outside Gamma’s direct core lending business.
If the question is framed a little less strictly, assuming the club continues to contribute but does not repeat the one-off effect, the earnings base falls to NIS 160.9 million. That is still solid, but it puts 2026 in a different place. The coming year will have to show that credit, fees, and funding management can sustain a high profit level even without accounting help of the kind that entered this year.
The practical point is not to pick one “correct” number and cling to it, but to understand the range:
- NIS 183.6 million is the reported accounting profit.
- NIS 160.9 million is profit after removing the net one-off effect flagged by the company itself.
- NIS 123.5 million is profit without the club associate at all.
Anyone building 2026 on the first number is taking something for granted that the filing itself decomposes. Anyone jumping automatically to the third may be too harsh, because the club still appears to have a genuine recurring earnings contribution even after the one-off is removed. The more balanced read is that 2025 revealed a valuable earnings source, but one that still needs to be normalized before it is treated as a fixed part of Gamma’s recurring profit base.
Conclusion
2025 was not a weak earnings year. It was an earnings year that looks inflated relative to what recurs by itself. The club associate mattered a great deal to the result, but not all of that contribution belongs in the same category. Roughly NIS 36.5 million looks like a more recurring share in the associate’s profit. Roughly NIS 23.6 million looks like a one-off equity uplift that should not be rolled forward mechanically.
So the right 2026 question is not whether the club continues to contribute. It is whether Gamma can sustain its profit level after that contribution returns to a more normal proportion. If yes, 2025 will read as a step-up year. If not, a large part of the jump will prove to have rested on an accounting line that looked bigger than the recurring earnings power behind it.
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