Max inside Clal in 2025: credit quality improved, but the special provision still distorts the story
Max ended 2025 with a 13.3 billion shekel credit portfolio, credit-loss expense down to 169 million shekels, and normalized net income of 318 million shekels. But the 170 million shekel pre-tax special provision tied to the VAT assessment still distorts reported profit and shows that the legal noise has not fully cleared.
The main article on Clal argued that the core business improved, but not every part of 2025 profit truly belonged to that core. This follow-up isolates Max, because that is where the gap between what actually improved and what the headline suggests is especially wide.
The central message is straightforward. Max's credit quality improved in 2025. That shows up in credit-loss expense, net write-offs, the allowance ratio, activity volumes, and capital. But reported earnings still do not tell that story cleanly, because the year carries a 170 million shekel pre-tax special provision following the court ruling on the VAT assessment tied to overseas credit-cardholder activity.
That is the key distinction: the provision belongs in the accounts, so it cannot simply be waved away. But it also does not mean that Max's current book deteriorated. Quite the opposite. Once you move from reported profit to credit metrics, portfolio behavior, capital ratios, and the dividend decision, Max ends 2025 looking stronger than the bottom line alone might imply.
Four numbers hold the thesis together:
- Max's normalized net income in 2025 was NIS 318m, versus NIS 273m in 2024.
- The one-off impact itself was NIS 170m before tax and NIS 131m after tax.
- Credit-loss expense fell to NIS 169m from NIS 216m, and the net write-off ratio fell to 1.15% from 1.43%.
- Common Equity Tier 1 rose to 10.2%, total capital rose to 13.0%, and in March 2026 a NIS 56m dividend was approved out of 2025 earnings.
What Actually Improved In The Credit Core
Max's 2025 core looks better on almost every metric that matters for a non-bank lender: activity expanded, the credit portfolio expanded, and quality metrics improved at the same time. That is not automatic. Often portfolio growth arrives with more write-offs or more problematic balances. Here, the opposite happened.
| Metric | 2024 | 2025 | Why it matters |
|---|---|---|---|
| Credit portfolio | NIS 11.6b | NIS 13.3b | In the investor presentation Max already frames itself as a credit platform large enough to move the group thesis |
| Active cards | 3.232m | 3.464m | The customer base kept widening |
| Transaction volume on valid cards | NIS 139.8b | NIS 153.8b | Core activity expanded, not just accounting adjustments |
| Credit-loss expense | NIS 216m | NIS 169m | Down by about 22% |
| Allowance ratio on receivables | 2.24% | 1.95% | Less provisioning was required against the book |
| Non-accrual receivables ratio | 1.13% | 1.06% | Lower stress in borrower behavior |
| Net write-off ratio | 1.43% | 1.15% | A real improvement in credit performance |
That is the crucial data point, because it creates a clear gap with the accounting headline. Credit-loss expense fell to NIS 169m from NIS 216m, and the company explicitly links the move both to lower net write-offs and to lower provisioning, against the backdrop of better portfolio quality and a change in mix. Anyone reading only the reported bottom line could miss that 2025's main problem was not a weaker credit book but a heavy exceptional charge sitting above it.
The broader business picture was also better. Total revenue rose to NIS 2.465b from NIS 2.244b, and pre-tax profit excluding adjustments rose to NIS 432m from NIS 380m. In issuing, pre-tax profit rose to NIS 185m from NIS 144m. In acquiring, it rose to NIS 247m from NIS 236m. So this was not a year of operating slowdown. It was a year of growth on both the consumer and merchant sides.
Management chose to frame the year exactly that way. In the investor presentation, Max talks about accelerating core growth, improving the risk profile, industry-leading return on equity after neutralizing one-time items, and expanding the ecosystem into something broader than a pure card story. That is not just presentation language. It rests on real operating numbers. The question is whether the market is ready to treat those numbers as the earnings base, or whether it is still stuck in the legal headline.
Where The Special Provision Still Distorts The Read
This is the center of the story. In the investor presentation, Max shows NIS 318m of net income after stripping out the one-off impact, versus NIS 273m in 2024. But the reported 2025 result carries a NIS 131m after-tax one-off effect, leaving reported net income at NIS 187m.
That impact did not come from the fourth quarter, from a deterioration in the credit book, or from an operating miss. It came from the August 6, 2025 court ruling on the appeal filed by the credit card companies against the VAT assessment tied to overseas activity by credit cardholders. Following that ruling, Max increased the provision by NIS 170m before tax, and the company makes clear that the year-end balance includes both the assessed periods and the period after them through December 31, 2025, together with linkage and interest.
There is another nuance the market can miss. Clal states that most of the provision relates to years before Clal acquired Max. The group also has a contractual indemnification right against the sellers of up to NIS 30m, and accordingly the impact at the Clal level was presented as NIS 140m before tax and NIS 100m after tax, net of the indemnification the company intends to pursue. That is not full protection, but it also means the charge says more about legacy legal baggage than about the current quality of Max's lending book.
So the special provision distorts the story in two opposite ways. On one side, anyone who ignores it entirely is making life too easy, because it is a real charge sitting in the accounts. On the other side, anyone who reads it as proof that Max's ongoing business weakened is reading the year incorrectly. The provision weighs on reported earnings, but not on the current credit metrics.
And the legal noise did not disappear at year-end. On March 22, 2026 Max, together with two other credit card companies, filed a joint request for a further hearing after a Supreme Court ruling that partially accepted an appeal against the dismissal of a motion to certify a class action. Max itself says that, at this stage, it cannot assess the chances of the request. This is not the same matter as the VAT assessment, and no new quantified exposure is provided here, but it does show that the legal perimeter around the story has not fully cleared yet.
What The Balance Sheet Says About The Quality Of The Improvement
The best way to test whether this is just a convenient normalization exercise or a real improvement is to move from the income statement to the balance sheet and capital. Here the evidence actually supports the more constructive read.
Reported equity rose to NIS 2.25b at the end of 2025 from NIS 2.061b. Common Equity Tier 1 rose to NIS 2.252b, and total capital rose to NIS 2.882b. The CET1 ratio improved to 10.2% from 10.0%, total capital improved to 13.0% from 12.3%, and the leverage ratio improved to 8.8% from 8.7%.
That chart shows why the special provision did not turn Max into a balance-sheet stress story. In March 2026 Max's board lowered the internal CET1 target to 9.0% from 9.25%, while keeping the total-capital target at 12.0%. Even after the provision, Max ended the year above both thresholds. The cushion is not huge, but it is there.
That also helps explain why a NIS 56m dividend, equal to 30% of Max's 2025 net income, was approved in March 2026. If the special provision had signaled a deep impairment in business quality, it would have been harder to see a dividend decision arriving so quickly after year-end.
There is also a funding improvement that can get lost under the legal headline. At the end of 2025 Max's external funding sources totaled NIS 7.964b: NIS 6.354b of bank funding and NIS 1.610b of non-bank market funding through commercial paper, bonds, and subordinated notes. During 2025 Max completed its first public commercial-paper issuance of about NIS 207m, a NIS 150m subordinated issuance, and a NIS 300m public bond issuance.
The implication is broader than the balance-sheet line. Management is trying to move Max from the frame of a pure credit card company to the frame of a wider credit and payments platform with more diversified funding. So as long as capital holds and the book keeps improving, the special provision looks more like a delay in that re-rating than proof that the old reading has returned.
Conclusion
Max finished 2025 with a cleaner credit book, a broader activity base, and stronger capital. That is the part that genuinely improved. The special VAT provision still sits on reported profit, so the year cannot yet be read as fully clean. But by the same token, the legal hit cannot be read as if it fully describes the state of the ongoing business.
Current thesis in one line: Max already shows real improvement in credit quality and capital in 2025, but the market still has to look through a reported earnings line distorted by a material legal charge.
What needs to happen now for the story to clear? Over the next 2 to 4 quarters, Max needs to show that write-off and non-accrual ratios do not start climbing again, that capital stays above internal targets even after the dividend, and that no new legal or accounting event pushes the core business back into the background. If that happens, the 14.9% return on equity that Max presents after neutralizing one-time items will start to look less like a presentation number and more like an earnings base the market can believe.
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