Peninsula 2025: Project Finance After Value, Growth, Concentration, and the Risk Ladder

What This Follow-Up Is Isolating

The main article argued that risk at Peninsula is no longer confined to the legacy business-credit franchise. This continuation isolates the project-finance book acquired from Value in May 2024, because by the end of 2025 it was already too large to remain a footnote, yet still not profitable enough to justify its new weight.

That is the core point. Segment assets reached NIS 230.2 million, up 71.5% versus 2024, and already represented 12.7% of total segment assets in the group. Segment net finance income rose to NIS 14.5 million, but operating profit fell to only NIS 5.2 million. In other words, the book already carries material balance-sheet weight, while contributing just 5.6% of group segment operating profit.

These numbers matter for more than profit. They matter because growth came together with high concentration, a risk ladder that has already shifted downward, and a book that is not simply senior secured exposure. Only 28% of actual credit is senior debt only, 66% is senior debt combined with equity-completion financing, and another 6% is equity-completion financing only.

The immediate conclusion: this is already a real group engine, but not yet a mature one.

Growth Arrived Before Full Earnings Proof

Peninsula bought the Value project-finance credit book for NIS 156.9 million and also allocated NIS 2.37 million to customer relationships. From that point on, the company moved from a single-segment lender into a two-segment structure. In less than two years this book grew to NIS 230.0 million gross, versus NIS 131.0 million at the end of 2024, a 75.6% increase.

That is very fast growth, but it did not translate into the same strength in profit. Segment net finance income rose 52.9% to NIS 14.5 million, while credit-loss expense jumped from NIS 0.18 million to NIS 2.60 million and segment expenses almost doubled to NIS 6.65 million. The result was that segment operating profit fell from NIS 6.0 million to NIS 5.2 million.

This is the key tension. The question is not whether the book expanded. It did, quickly. The question is what kind of growth it delivered. By year-end 2025 Peninsula had succeeded in scaling the activity, but it still had not shown that each additional shekel allocated to this segment earns a return that properly compensates for the risk, monitoring burden, and capital it consumes.

There is also a mitigating side that matters. The activity is built around closed project finance, alongside equity-completion lending, with a minimum 12% equity requirement at project level, of which at least 5% must come from the developer itself, with a dedicated project account, controlled release of funds, and monthly monitoring by external construction supervisors. So the problem here is not a loose structure. The problem is that growth has already arrived ahead of full proof of quality.

Concentration Is Still Too High For Comfort

At first glance the activity can look reasonably diversified: 21 active projects at the end of 2025. But the economic concentration is much tighter than that headline suggests.

The sharpest data point is that the ten largest loans in the segment accounted for 87.4% of the activity's credit book, while also representing 11.1% of the group's total consolidated credit portfolio. So even if project finance is still a sub-segment, it is already large enough for a relatively small cluster of exposures to affect how the whole Peninsula story is read.

Borrower concentration is not comfortable either. The largest borrower represented 29.4% of project-finance credit. The top three borrowers already reached 56.9% of the book. Alongside that, the single largest project stood at NIS 66.8 million of actual credit, with a credit line of NIS 69.1 million.

The project mix tells the same story. Fourteen Tama 38/1 projects account for NIS 96.8 million, six Tama 38/2 projects account for NIS 63.7 million, but one initiation project alone accounts for NIS 66.8 million, 29% of actual credit in the activity.

What matters most is that concentration sits in two layers at once: in a small number of borrowers and in one especially large project. That is exactly the kind of book that can look quiet right up to the point when it stops being quiet.

The Risk Ladder Has Already Shifted Down

If the goal is to understand book quality, the starting point is not the default line. The starting point is how much of the portfolio still sits in the comfort zone. Here the picture changed sharply within one year.

At the end of 2024, NIS 82.6 million, 63.1% of the book, sat in the highest absorption-capacity bucket of above 35%. By the end of 2025 that amount was almost unchanged in nominal terms at NIS 78.9 million, but as a share of the book it had fallen to only 34.3%. That means most of the growth did not enter the strongest layer of the portfolio.

Instead, NIS 64.1 million now sits in the 25% to 35% absorption bucket, NIS 14.7 million in the up-to-25% bucket, NIS 23.9 million is classified as a significant increase in credit risk, and NIS 48.5 million is already classified as credit-impaired. Together, Stage 2 and Stage 3 reach NIS 72.3 million, 31.4% of the book, versus only NIS 20.0 million, 15.2% of the book, a year earlier.

This no longer looks like noise. During 2025, four new projects totaling about NIS 31 million were classified as projects with a credit-event default. At the same time, four projects that had already been classified as default in the prior year remained outstanding at about NIS 17.5 million. So the year-end default bucket is not the result of one accidental file. It is built from several projects that deteriorated plus older problem projects that had not yet exited the bucket.

There is also an intermediate layer the report does not let the reader ignore. The segment's net aging table shows that, in addition to NIS 23.8 million of loans with significant risk increase and NIS 46.1 million of defaulted loans, another NIS 37.2 million sits in loans where payment dates have already been changed even though they are not classified as a significant increase in risk. That does not automatically mean distress, but it does mean the gray zone in the portfolio is wider than the formal Stage 2 and Stage 3 labels alone suggest.

Another important detail is that the company does not manage this risk book through a standard aging model. It manages it through absorption capacity, sales pace, execution pace, and triggers such as receivership in other projects of the same borrower. That is a sensible framework for project finance. But it also means the problem can first show up in shrinking protection cushions and only later in classic delinquency patterns.

Why The Accounting Damage Still Looks Smaller Than The Risk Map

At first glance one could argue that the red flag is overstated, because total allowance in the segment stands at only NIS 2.78 million, 1.21% of the gross book, and NIS 2.35 million of that is tied to credit-impaired loans. That is not a provision level that looks catastrophic.

But this is exactly where the gap between the risk map and the accounting line sits. The allowance is determined through expected revenue and cost estimates, execution progress, sales pace, and collateral, not through a mechanical delinquency formula. In other words, Peninsula still assumes that in a meaningful share of these cases the issue can be worked through via project surplus, pledges, mortgages, guarantees, and continued close supervision of execution.

That may be a reasonable assumption. In most projects the core collateral is a first-ranking mortgage, and in other cases the company also holds surplus pledges, share pledges, project-account charges, and irrevocable assignments of rights. But until those assumptions turn into actual repayment, the market does not have to give this segment the same credit it gives Peninsula's older core franchise.

That also explains why operating profit remains relatively low. The segment already produces 9.2% of group net finance income, but only 5.6% of group operating profit. Part of that gap reflects the operating cost of a new engine, and part of it is the price of risk that started showing up before the segment was fully seasoned.

There is one more reason this deserves immediate attention: the project-finance activity has dedicated credit facilities of NIS 300 million from three banking corporations, and about NIS 138 million was still available at the presentation date. So the ability to keep growing is still there. The next question is therefore not whether Peninsula can grow the book, but whether it can grow it while diluting concentration and improving book quality before the book gets larger again.

What Has To Happen Next

For project finance to move from an interesting growth engine to a group engine that investors can rely on, three things need to happen together.

First, concentration has to fall. A book where the largest borrower is almost a third of the activity and the top three are more than half of it still has not built a real margin for error.

Second, the risk ladder has to move back up. It is not enough for existing problem files to be collected without a large loss. Peninsula has to show that the next phase of growth is entering mainly the higher-absorption layers rather than continuing to inflate the zone between Stage 2 and Stage 3.

Third, profit has to start catching up with balance-sheet weight. If the segment keeps sitting around 12% to 13% of segment assets but only around 5% to 6% of operating profit, the market will increasingly read it as a heavy capital user with insufficient return.

Conclusion

Project finance can no longer be described at Peninsula as an option. It is already a material part of the group thesis. But as of the end of 2025 it is still an activity that has grown faster than its quality has been proven.

The current thesis: Peninsula has built a meaningful project-finance book in a short period of time, but that book still earns less than its weight, remains too concentrated, and already carries a thick enough risk layer to affect the way the whole stock is read.

The intelligent counter-thesis is clear. This is a project-finance activity built on closed-lending discipline, hard collateral, minimum equity requirements, close monitoring, and insurance-company cooperation. It is entirely possible that the already-classified defaults will be resolved with only limited damage. But until that is demonstrated, the more conservative read is that the new book is already large enough to shape the Peninsula story, yet still not clean enough to deserve a premium.