Max IT in 2025: The Credit Book Is Growing Cleaner, but Funding and Capital Still Set the Story

Company Overview

Max IT still looks, at first glance, like a credit-card company. In 2025 that is no longer enough. It is now a broader financial platform with two very different economic engines: a wide payments network that issues, acquires, and processes cards, and a growing credit book that makes funding, capital, and balance-sheet discipline central to the thesis. That is the right way to read the year. Anyone who stops at card volumes and revenue growth misses the active bottleneck.

What is working right now is most of the operating layer. Revenue rose to NIS 2.465 billion from NIS 2.244 billion. Card transaction volume rose to NIS 153.824 billion from NIS 139.770 billion. Valid cards increased to 4.214 million from 3.903 million. The credit book climbed to NIS 13.288 billion, including NIS 12.090 billion to private customers and NIS 1.198 billion to businesses. Credit quality also looks better, with credit-loss expense down to NIS 169 million from NIS 216 million.

What is still not clean is the profitability of that growth. Reported net profit fell to NIS 187 million from NIS 273 million after a one-off pre-tax expense of NIS 170 million linked to the VAT ruling on cross-border card activity. Even after stripping that item out, the picture is more complex than the headline suggests: normalized net profit rose to NIS 318 million, but net interest income increased by only 6% while the credit books themselves grew at double-digit rates, and both funding and operating costs moved higher with the scale of the business.

That is the core story. Max is no longer judged only on whether it can add cards, grow acquiring volumes, and push more credit. It is now judged on whether the other side of the balance sheet, funding sources, capital cushions, and the economic price of growth, can keep up. That matters even more because this is a bond-only listed issuer rather than a listed equity story. The market read here runs mainly through funding access, capital discipline, and earnings quality, not through an equity multiple.

Four early takeaways matter most:

• The improvement in credit quality did not come only from macro conditions. Vehicle-secured lending rose to 34% of the total book from 29% a year earlier, so part of the improvement came from a structurally safer mix.
• Almost all of 2025 reported profit came from acquiring. The issuing segment reported a net loss of NIS 1 million because of the one-off VAT hit, while the acquiring segment earned NIS 188 million. Even after normalizing for the one-off item, issuing earned only NIS 130 million on average risk-weighted assets of NIS 19.171 billion.
• Capital-markets funding helps, but banks still provide the oxygen. At the end of 2025, bank credit stood at NIS 6.383 billion versus NIS 1.647 billion of bonds, subordinated notes, and commercial paper.
• The capital cushion is better, but not wide enough to ignore returns on capital. The common equity tier 1 ratio rose to 10.2%, and in March 2026 the board lowered the internal target to 9.0% from 9.25%. That leaves room, but not room that justifies indifference to capital efficiency.

The quick economic map looks like this:

Events and Triggers

The ruling that swallowed reported profit

The first trigger: on August 6, 2025, the district court issued its ruling in the consolidated appeal by the credit-card companies over VAT assessments tied to fees from transactions at merchants outside Israel. For Max, the practical effect was an additional provision of NIS 170 million before tax as of June 30, 2025. That is the accounting event that broke reported profit for the year.

The story also did not end there. At the end of September 2025, the company received a third VAT assessment totaling NIS 273 million, including linkage and interest through the assessment date, for periods from July 2020 through March 2025, and filed an objection in January 2026. By year-end, the provision already covered all three assessments and the periods that followed them through December 31, 2025. Against that, management says the future earnings impact of the ruling is not expected to be material. That is an important distinction: 2025 took a real hit, but management is not describing a structural change that destroys the economics of the business going forward.

2025 was the year the capital markets opened

The second trigger: Max became a reporting company in April 2025. The change did not stay at the level of status. Within a few months it issued public commercial paper of about NIS 207 million, subordinated notes series V in the amount of NIS 150 million, and bond series E in the amount of NIS 300 million. Earlier in January 2025 it also expanded commercial paper series 2 by about NIS 154 million.

The importance is double-sided. On one hand, the move diversifies funding. On the other, it signals that the company understands that growth in the credit book, especially in longer-duration products, can no longer rely only on banks and short credit lines.

Line renewals are not technical noise

The third trigger: in January 2026, two secured bank facilities of NIS 3.3 billion and NIS 2.1 billion were extended by about one year each with no material change in terms. Earlier, in May 2025, another NIS 2.4 billion facility was extended. These are not technical footnotes. They are the oxygen pipe of the book. As long as renewals keep happening without a material deterioration in terms, the company can continue to grow without entering immediate funding stress.

Management is already thinking about the next layer

The fourth trigger: an updated multi-year strategy was approved in the third quarter. It includes deeper direct relationships with private customers, more direct-to-consumer credit, stronger solutions for businesses, broader payment services, savings and account-management services, and fintech partnerships. In October 2025 the company launched an interest-bearing payment account, and in the same period it signed an aggregator agreement in the American Express brand. These do not move 2025 on their own, but they show where Max is trying to take its revenue base beyond interchange and standard acquiring fees.

Efficiency, Profitability and Competition

Activity volume is growing faster than financial profitability

The central story of 2025 is a paradox. Almost every operating engine moved in the right direction, but not all of that progress reached the bottom line at the same pace. Card-activity revenue rose 12% to NIS 1.596 billion. Gross interest income rose 9% to NIS 1.396 billion. But interest expense rose 15% to NIS 549 million, so net interest income increased only 6% to NIS 847 million.

That means the company is indeed growing the credit book, but the price of funding is rising with it. This is exactly where Max stops being only a payments-usage story and starts being judged like a credit platform: not on whether it can grow, but on whether the growth remains attractive after the cost of money.

Issuing is much larger, but acquiring still carries the profit

The segment table sharpens how asymmetric the economics are:

The implication is straightforward. Max is building a large credit book, but acquiring still delivers a much higher return on a far smaller balance-sheet base. That is not a criticism of growth. It is a reminder that balance-sheet growth will have to show a clearer improvement in profitability per unit of capital over the next few years.

Credit quality improved, but the risk mix also changed

The decline in credit-loss expense looks, at first glance, like clean good news, and there is real improvement here. The credit-loss expense ratio fell to 1.01% from 1.42%. The net write-off rate fell to 1.15% from 1.43%. The allowance ratio fell to 1.95% from 2.24%. The non-accrual ratio fell to 1.06% from 1.13%.

But the improvement did not come in a vacuum. In 2025, the share of vehicle-secured lending also rose to 34% of the total credit book from 29% a year earlier. Inside private credit, vehicle loans rose to NIS 4.452 billion from NIS 3.305 billion, while solo loans rose to NIS 4.860 billion from NIS 4.536 billion and revolving credit barely moved, at NIS 2.060 billion versus NIS 2.011 billion. In other words, Max improved portfolio quality not only through better operating execution but also through a shift toward safer lending categories.

That point looks even stronger against the relief data. At the end of 2025, outstanding credit whose payment deferrals had not yet expired was not material, and loans granted at zero or reduced interest rates stood at only about NIS 82 million. By the end of 2025, the company was no longer leaning on a broad support layer that masked a problem in the book.

Competition is already more expensive, not easier

There is also a competitive price that matters. Bank Leumi is still a material customer, and revenue from that relationship represented about 21% of issuing-segment revenue net of payments to banks, and about 18% of total issuing-segment revenue. At the same time, the club-card market is becoming more aggressive. The company says explicitly that competition in this area shows up in higher renewal and retention costs, and in August 2025 it added a one-off grant of NIS 25 million plus VAT to the Dream Card agreement with Fox, even if the agreement is not ultimately extended in practice.

That is a useful clue to growth quality. Non-bank cards and clubs are real growth engines, but they are not free. They require more marketing, more retention spending, and at times more economic give-up to defend the channel.

The acquiring segment is also highly competitive. The company describes the market as one with ongoing erosion in the acquiring spread, very low switching barriers for merchants, and growing pressure from aggregators, hosted acquirers, and alternative payment methods. Max still holds about 20% to 25% of Israeli acquiring volume, but protecting that share now requires ongoing investment in value-added products for businesses, not just collection of the base acquiring fee.

Cash Flow, Debt and Capital Structure

In a financial company, the cash frame has to be defined correctly

For Max, the more useful frame is all-in cash flexibility rather than the classic free-cash-flow lens used for industrial companies. The reason is simple: extending credit to customers is the core business, so a large cash outflow inside investing activity does not necessarily signal weakness. It often signals growth in the loan book. The right question is how much funding oxygen remains after the real cash uses are accounted for.

In 2025, cash from operations was NIS 1.065 billion. Financing cash flow added another NIS 1.201 billion. Against that, net credit origination to cardholders and merchants consumed NIS 1.974 billion, and equipment purchases absorbed another NIS 106 million. Before foreign-exchange effects, cash increased by NIS 187 million, and year-end cash and cash equivalents stood at NIS 742 million versus NIS 600 million a year earlier.

The right reading is not that Max is burning cash. The right reading is that it is growing the credit book quickly, and that growth is being funded through both operating cash flow and debt issuance. That is why funding quality matters here almost as much as credit quality.

Funding is broader, but still mainly bank-based

At the end of 2025, Max had total funding facilities of NIS 11.8 billion, including NIS 10.35 billion of secured lines and NIS 1.45 billion of unsecured lines. Total cash-credit utilization stood at NIS 6.354 billion. On the balance sheet itself, bank credit stood at NIS 6.383 billion versus NIS 5.993 billion a year earlier.

Against that, the capital markets have started to matter. Principal outstanding on bonds, subordinated notes, and commercial paper rose to NIS 1.610 billion from NIS 796 million a year earlier, and the total balance-sheet liability rose to NIS 1.647 billion from NIS 816 million. That is a sharp step-up, but the conclusion should not be overstated: the capital markets are now a meaningful funding leg, not yet the dominant one.

There is also some asset-liability logic here. Solo loans are held at durations of about 1.7 to 2.5 years, and vehicle loans at about 2.5 to 3 years. In parallel, the company issued longer-dated liabilities in 2025, including subordinated notes that run to 2036. The reasonable read is that Max is trying to pull the liability stack forward as the duration of the credit book lengthens. That does not remove dependence on annual bank-line renewals, but it does improve the structure.

Capital improved, but the next test is return on capital

Equity rose to NIS 2.250 billion from NIS 2.061 billion. Common equity tier 1 capital rose to NIS 2.252 billion, and total capital to NIS 2.882 billion. The CET1 ratio rose to 10.2% from 10.0%, the total capital ratio to 13.0% from 12.3%, and the leverage ratio to 8.8% from 8.7%.

Against regulatory requirements, that looks comfortable. The minimums are 8.0% for CET1 and 11.5% for total capital. But the more interesting point sits inside the internal target. On March 10, 2026, the board lowered the internal CET1 target to 9.0% from 9.25%, while keeping the total-capital target at 12.0%. That suggests the company is more comfortable with its current risk profile, and perhaps also wants to preserve a bit more room for growth.

There is still an external layer to remember. Another downgrade of Israel by two notches or more, to BBB+ or below, is expected by the company to reduce the CET1 ratio by about 0.25%. Against that, the new operational-risk calculation method from January 2026 is expected to improve capital ratios by about 0.3%. In other words, the capital cushion is not tight, but it is also not fully insulated from regulatory and macro spillovers.

Outlook and Forward View

The annual package does not provide a full quarterly bridge that would let the fourth quarter be treated as a standalone mini-report. So the forward read relies mainly on the annual trends and the events after the balance-sheet date. In Max's case, that is enough, because the 2026 test is unlikely to be decided by one quarter alone. It will be decided by a sequence of checks around funding, capital, and growth quality.

Four points will define 2026:

• Demand has already been proven. The 2026 question is not whether the credit book can grow, but whether net interest income can move closer to that growth rate.
• Credit quality improved together with a safer mix. Now the market needs to see whether that improvement can hold without another major increase in the vehicle-secured share.
• Line renewals and capital-markets access remain central to the thesis. As long as banks keep renewing facilities and the capital markets stay open, the company can continue growing at the current pace.
• Even without the one-off item, issuing profitability still has to catch up with the amount of capital and balance-sheet weight it consumes.

2026 looks like a proof year

The updated strategy is coherent. It aims to deepen direct private-customer relationships, broaden credit and savings solutions, expand the service set for businesses, and build additional revenue layers around the payments platform. That makes strategic sense. The problem is that the company has already reached the point where every new engine will be judged not only on volume growth, but also on its contribution to profit and funding flexibility.

That is why 2026 looks like a proof year. Not a reset year, because the company enters it with higher revenue, a cleaner credit book, a broader card base, a better capital cushion, and better capital-markets access. But also not a clean breakout year, because growth still depends on external funding, competition in both acquiring and club cards remains intense, and the gap between book growth and net-interest-income growth is still open.

What has to happen for the read to improve

The first thing that has to happen is a narrower gap between book growth and net-interest-income growth. In 2025, private credit grew 15% and business credit 11%, while net interest income rose only 6%. If that gap stays wide in 2026, it will mean the book is still growing faster than the economics it produces.

The second thing is that credit quality has to hold. Credit-loss expense fell, write-offs fell, and non-accrual balances also edged lower. If those figures stay stable while the book keeps growing, it will be easier to believe the improvement is structural rather than a temporary mix of safer product mix and easier macro conditions.

The third thing is that the funding structure has to keep lengthening and broadening. Renewing the NIS 3.3 billion and NIS 2.1 billion lines in January 2026 is a good sign, but it is a one-year sign. If the company keeps adding more public debt and more longer-dated funding into the balance sheet, the duration gap between assets and liabilities should narrow.

The fourth thing is that the newer products and services need to begin reducing the company's dependence on the classic economics of cards, interest spread, and interchange. The interest-bearing payment account, the American Express arrangement, and the broader services to businesses are not proven profit engines yet, but they are the path through which Max is trying to build a less eroding revenue base.

What would weaken the thesis

The bearish path is not a sharp fall in demand. It is subtler than that: funding costs keep rising, competition for clubs and business customers keeps making retention and acquisition more expensive, and the company ends up with a larger credit book but not with a sufficient improvement in return on equity. In that scenario, even a relatively comfortable capital cushion stops looking impressive.

A second negative path is a longer spillover of the VAT-related legal and accounting process into 2026, creating more noise and more uncertainty. The company believes the future impact is not material, but any delay, appeal, or change in implementation would keep the issue in the center of the story.

In the short to medium term, the market is likely to watch four points most closely: whether funding renewals keep happening without a material deterioration in terms, whether net interest income starts moving faster, whether credit quality stays stable even as the book expands, and whether management can show that the newer initiatives are becoming more than an attractive strategic narrative.

Risks

The VAT ruling is still not fully behind the company

The first risk is not credit. It is tax and litigation. The additional NIS 170 million pre-tax provision has already been booked, but the process is not closed, the company is still evaluating its steps, and the third assessment received in September 2025 was challenged only in January 2026. That does not mean another similar hit is inevitable. It does mean the issue is still alive.

Dependence on external funding is part of the model, and therefore part of the risk

The book is growing faster than capital, so Max needs open capital markets and cooperative banks. The company is currently in compliance with all of its obligations, and the lines were extended with no material change in terms, but because a major part of the facilities renews over one to three years, funding risk is not a tail scenario. It is a standing part of how this issuer has to be read.

Competition, concentration, and alternative payment rails

Bank Leumi remains a material customer. Visa remains a highly material brand to the activity. Competition in club cards is becoming more expensive. Competition in acquiring is eroding spreads. New entrants, digital wallets, payment apps, and account-to-account solutions all pressure the most classic revenue layer. These are not hidden risks, but they are a good explanation for why volume growth alone is no longer enough.

The class-action layer also deserves attention

In February 2026, the Supreme Court partially accepted an appeal against the dismissal of a motion to certify a class action concerning direct-marketing practices toward elderly customers, and returned part of the claims for further examination. The company says it cannot estimate the exposure from this case. This is not a base-case operating risk, but it is still an external warning signal worth keeping in view.

Conclusion

Max ended 2025 looking less like a classic card issuer and more like a full credit platform supported by a payments infrastructure. That is what supports the thesis right now: bigger activity volumes, a cleaner credit book, broader funding access, and a somewhat more comfortable regulatory capital position. It is also what keeps the story from being clean: funding still sets the pace, and the return on capital in the main growth engine is not yet convincing enough.

Current thesis: Max has already shown it knows how to grow. The 2026 test is whether it can turn that growth into cleaner funding economics and cleaner capital economics.

What changed versus the older way of reading the company is mainly weight. In 2025 it is harder to read Max as only a card company. The size of the credit book, its duration, the price at which it is funded, and the capital that supports it have become the main story. The strongest counter-thesis is that this caution is overstated: credit quality is improving, capital is stronger, the institutional market is already open, and the VAT charge is mostly one-off noise. That is a serious counter-argument. But for it to win, it will have to show up in margin, not only in more volume.

What could change the market's interpretation in the short to medium term? A continued run of funding renewals on good terms, a narrower gap between book growth and net-interest-income growth, and stable credit quality even while the book keeps expanding. What would undermine it? Another step-up in funding cost, more expensive competition in club cards and acquiring, or another round of drag from the VAT process.

Why does this matter? Because in a business like Max, quality is no longer measured only by how many cards were issued and how much credit was extended. It is measured by whether the funding and capital layers can support that growth without eroding the profit the business is supposed to create.