Luzon Credit In 2025: Capital Is Back, But Now It Has To Prove Underwriting And Growth

Getting To Know The Company

At first glance, Luzon Credit still looks like a fintech story. The presentation leads with technology, a unified system, digital underwriting, and a platform that is supposed to create scale. But 2025 points to something more useful and more sober. This is not a software company selling licenses. It is a non-bank credit platform trying to rebuild its economics through three engines, P2P credit brokerage, direct lending, and a new mortgage JV with Nawi. Technology is a tool. The economics are decided by underwriting, capital, and asset quality.

What is working now? Three things. First, the historical withdrawal overhang on the platform is no longer open-ended. On January 26, 2026 the company said it had completed all withdrawal requests opened through the end of 2025, covering about NIS 2 billion plus roughly NIS 220 million of accumulated interest. Second, in March 2026 the company completed a NIS 107 million gross equity raise. Third, Nawi Et Luzon already has a license, already opened NIS 800 million of bank credit lines, and had already drawn NIS 300 million by year-end 2025. In other words, the old funding bottleneck has eased materially.

What is still not clean? The 2025 operating core remained weak. Revenue fell to NIS 31.7 million, from NIS 52.9 million in 2024 and NIS 66.9 million in 2023. The direct-lending arm contributed almost nothing, just NIS 226 thousand of revenue, and finished the year with no loan book. Annual net profit was only NIS 171 thousand, after an operating loss of NIS 1.8 million. This was not a breakout year. It was a year in which the old structure shrank while the new one had not yet come up to speed.

The easiest point to miss is the quality of the year-end profit. On a quarterly view, the fourth quarter returned to about NIS 1.1 million of operating profit and roughly NIS 4.6 million of net profit. That sounds like a sharp turn. But a large part of that gap came from fair-value income on the Leumi option, about NIS 4.5 million in the quarter. So the improvement is real, but it is still not clean of accounting noise.

The active bottleneck has changed. A year ago the core question was whether the company could survive the withdrawal pressure. Today the question is different. Can the new capital, the new funding lines, and the new license actually turn a shrinking platform into high-quality growth without reopening old holes in underwriting and product responsibility. That is the real story of 2026.

There is also a practical market constraint worth putting on the table immediately. At the latest closing price of NIS 0.56 per share and roughly 484.6 million shares outstanding, market value sits around NIS 271 million. But the latest daily trading turnover was only about NIS 41.7 thousand. This is an illiquid stock. Even if the business story improves, the path from thesis to actual tradability is not smooth.

The Economic Map In One View

Three Strengths And Three Yellow Flags

Events And Triggers

The Equity Raise Changed The Problem, It Did Not Solve The Whole Thesis

On February 8, 2026 the company announced it was examining an equity raise of about NIS 100 million, and on March 5, 2026 it completed a public offering of 187.7 million shares at NIS 0.57 per share, for gross proceeds of NIS 107 million. In the presentation, management framed the move as the base for two uses, platform nostr inside the P2P activity, and equity support for expanding Loan2Own through additional debt raising.

This is important because it marks a shift from defense to offense. In 2025 the company was still speaking mainly about stabilization, withdrawals, efficiency, and clearing old commitments. After March 2026, the market is no longer judging it only on survival. It is judging it on what it does with new capital. That is an improvement, but it also raises the bar.

The counterpoint is obvious. The raise relieved part of the funding pressure, but it also expanded the share base and made the 2026 execution test tougher. If the new capital is not translated relatively quickly into high-quality lending, revenue growth, and better unit economics, the market may conclude that the balance sheet improved before the business model really did.

Nawi Et Luzon Is Already Operating, But Its Economics Do Not Yet Flow Into Operating Profit

The most important strategic development of 2025 was the creation of Nawi Et Luzon. The JV, in which Luzon holds 45% through Tarya P2P, received a broad lender license on September 10, 2025, began operating on December 4, 2025, and signed two bank facilities in December totaling NIS 800 million. By year-end it had already drawn NIS 300 million.

That materially improves the growth base. It opens a mortgage and real-estate-secured lending channel on a scale the company did not previously have. It also fits management’s attempt to reposition the company from a pure brokerage platform into a broader credit platform.

But both sides matter. Nawi Et Luzon is accounted for under the equity method, so its results are not part of the company’s reported operating profit. More than that, the company did not recognize its share of Nawi Et Luzon’s 2025 losses, NIS 684 thousand, because under the accounting rules its share of losses exceeded its recognized rights. The meaning is straightforward, the growth there is real, but the path into reported shareholder economics is not direct.

The Leumi Option Stopped Being A Major Accounting Burden, But It Still Distorted The Read Of 2025

The Leumi option liability fell from NIS 6.08 million at end-2024 to NIS 4.07 million at end-2025, generating NIS 2.0 million of finance income for the full year. In the fourth quarter alone, combining the annual numbers with the three reported quarters implies roughly NIS 4.5 million of fair-value income.

After the balance-sheet date, on March 26, 2026, Leumi exercised the option on a net basis, and the company issued only 2.81 million shares, about 0.57% of outstanding share capital. That matters because an accounting line that was material to 2024 and 2025 earnings ended up as only minor dilution.

So how should 2025 be read? A reader who looks only at fourth-quarter net profit gets too optimistic a picture. A reader who keeps focusing on the old option liability misses that the accounting distortion has become smaller. The real improvement is that this noise is fading, but it is still too early to replace it with a full operating-turnaround story.

The Name Change Was Not Just Cosmetic

In February 2026 the company changed its name from Tarya Israel to Luzon Credit and Finance. That looks like a small point, but in practice it marked a shift from a brand centered on a P2P platform to a broader structure built around credit, mortgages, and group capital. Even from the market’s point of view, the company is no longer asking to be read only as a brokerage system.

The catch is that the new brand will be judged on the new economics, not on the slide deck. If 2026 ends without meaningful platform growth and without proof of scale in direct lending, the rebranding will look like narrative getting ahead of delivery. If growth does show up, it will look like an early and correct signal of the direction of travel.

Efficiency, Profitability And Competition

The core story of 2025 was not collapse. It was contraction. The company stayed alive, leaner, and better funded, but its reported activity remained much smaller than before. That is clearest when revenue is broken down by source.

The chart makes the problem plain. Revenue from the real-estate channel inside the platform fell from NIS 46.9 million in 2023 to NIS 16.4 million in 2025. Lender fees were more resilient, but still dropped to NIS 14.9 million. And what was supposed to become the new engine, direct lending, barely existed in the 2025 income statement. In other words, the company did not yet move cleanly from the old model to the new one. It mostly shrank the old one and started building the new one.

The Fourth Quarter Returned To Operating Profit, But Net Profit Still Does Not Tell The Full Truth

The fourth quarter gave the company some oxygen. Revenue was about NIS 7.1 million, operating profit returned to roughly NIS 1.1 million, and net profit reached about NIS 4.6 million. But this is exactly where the reader needs to stop and separate things carefully. A large part of net profit came from fair-value income on the Leumi option, not from the core business. In the first quarter that same option created an NIS 8.2 million expense, while in the fourth quarter it created NIS 4.5 million of income.

So the right reading is that the operating business stabilized somewhat, but 2025 still does not provide a clean enough number to claim the company is fully back on track. That is why operating profit matters more here than net profit.

The Technology Exists, But In 2025 It Still Does Not Look Like Scale Economics

One of management’s recurring claims is that technology creates a structural advantage. That is probably true at the operational level. But in 2025 the technology still does not look like a clear operating-leverage machine. Headcount and service providers fell to 49, from 53 in 2024 and 57 in 2023, yet revenue per employee also fell, to about NIS 647 thousand, from roughly NIS 998 thousand in 2024 and about NIS 1.17 million in 2023.

That is not accidental. Service cost from Partake, the fintech company controlled by related parties, still stood at NIS 4.47 million in 2025, after NIS 5.23 million in 2024 and NIS 11.14 million in 2023. Regulatory consulting routed through Partake-linked arrangements also continues. Meanwhile, direct R&D effort had already fallen to roughly NIS 0.6 million in 2025, from NIS 1.1 million in 2024 and NIS 7.5 million in 2023.

The takeaway is that the technology is real, but 2025 does not yet prove it has transformed the company into a lean software-like model. It proves mostly that the model still relies on a semi-external technology infrastructure that is cheaper than before, but still material. That is not automatically a problem. It is a problem only for anyone telling themselves that the company has already crossed into obvious operating leverage.

Competition Exists, But The Immediate Threat Was Not Mainly There

The company operates in highly competitive markets, against banks, non-bank lenders, and mortgage players. But in 2025 its immediate problem was not that competitors took price away. The problem was that the platform shrank, withdrawals weighed on liquidity, and the direct-lending arm barely operated. In other words, the main bottleneck was internal, the pace at which capital and origination capacity could be rebuilt.

That matters for the coming year as well. If 2026 is strong, it probably will not be because competition suddenly eased. It will be because the company manages to turn capital, regulation, and technology into higher-quality underwriting and products that bring borrowers and lenders back.

Cash Flow, Debt And Capital Structure

The right way to read Luzon Credit is through cash, not just through net profit. On an all-in cash flexibility basis, the company ended 2025 with NIS 36.1 million of cash and cash equivalents, down from NIS 41.2 million a year earlier. That is still a decent cash base for a company of this size, but the path matters.

This chart highlights three important moves. First, 2024 was a much stronger cash year than 2025. Second, in 2025 the company returned to burning cash in operating activity, about NIS 4.5 million. Third, contract liabilities, which are effectively fees from purchasing groups not yet recognized as revenue, fell from NIS 15.2 million to NIS 9.5 million after the company recognized about NIS 5.75 million from the opening balance during the year.

That last point is critical. Management explicitly says that the old deferred-revenue release ended in the second quarter of 2025. That means the 2025 accounts still benefited from a residual accounting tailwind from earlier activity, but 2026 will no longer get the same cushion automatically. From here, the numbers will have to come from new business, not from amortizing older contracts.

The Withdrawal Story Has Been Closed, But It Has Not Been Erased From The Economic Memory

From the start of 2025 through the report date, withdrawal requests exceeded deposits on the platform by about NIS 330 million. That was not a side issue. It was the main mechanism through which the old model was being squeezed. The company did succeed, in January 2026, in closing all withdrawal requests opened through the end of 2025, and that is significant. But it needs to be read correctly. It does not mean investors have already returned to a growth phase. It means the company has earned back the right to try to grow without an open liquidity wound.

The Product-Responsibility Legacy Did Not Shrink With The Platform

This is one of the most important findings in the report, and it does not sit in the headline. The platform loan book fell from NIS 2.33 billion to NIS 1.24 billion, almost a 47% contraction. Maximum exposure under the product-responsibility framework also fell, from NIS 484.4 million to NIS 389.2 million. But loans actually purchased under that framework rose slightly to NIS 26.9 million, and the allowance on them rose to NIS 18.3 million.

That means the old problem did not become more dangerous, but it also did not disappear with the shrinking platform. In fact, the ongoing product-responsibility expense fell sharply to only NIS 226 thousand in 2025, after NIS 2.23 million in 2024 and NIS 7.90 million in 2023, yet that does not mean the troubled stock was cleaned up. It means only that the current-period charge became much smaller. That distinction matters. The balance sheet is still carrying the past, even if the current P&L looks calmer.

The Debt Profile Is Clean Enough, But Real Capital Freedom Opened Only After The Balance-Sheet Date

At the level of the parent company, the debt picture is relatively simple. The old NIS 1.5 million bank loan was fully repaid in October 2025. Lease cash outflow was NIS 527 thousand, and lease liabilities fell to only NIS 323 thousand by year-end. So there is no near-term debt wall at the company itself.

But that does not mean capital flexibility was already broad at year-end. Until March 2026 the company was still relying on NIS 36 million of cash, negative operating cash flow, and a model that had not yet returned to growth. The equity raise in March is what moved it to a different level of flexibility. That is why 2026 needs to be read through two frames at once, end-2025 was still a transition point, while March 2026 opened a different phase.

Outlook

Before looking at the 2026 budget, there are four non-obvious points that need to stay in view:

1. The budget still relies mainly on the platform coming back, not on an immediate jump from Nawi Et Luzon.
2. Budgeted direct-lending income of NIS 6.1 million is planned only for the third and fourth quarters, after a year-end with no direct loan book.
3. The old deferred-revenue release already ended in the second quarter of 2025, so 2026 must come from fresh origination.
4. Even if Nawi Et Luzon grows quickly, it still will not sit inside Luzon Credit’s reported operating profit.

The headline numbers look good. The approved 2026 budget points to NIS 35.12 million of P2P fee income, another NIS 1.64 million from new investment tracks, NIS 6.13 million of direct-lending income in the third and fourth quarters, total revenue of NIS 42.9 million, and operating profit of NIS 5.34 million.

But what matters is what sits underneath those numbers. If 2025 ended with only NIS 226 thousand of direct-lending revenue and no direct loan book at all, then a budget for NIS 6.1 million already in 2026 assumes not only a restart in origination, but a restart at a pace and quality level that can produce meaningful recognized income within a matter of months. That is not impossible. It is also not something the prior year gives a firm foundation for.

The same is true for the platform. The budget still expects the bulk of revenue to come from P2P fees. So even if management is telling a newer story built on mortgages, mezzanine, and nostr, the operating core of 2026 is still supposed to come from the old engine. If the old engine does not re-expand, the budget will look aggressive very quickly.

There is also an important structural point. In February 2024 the regulator published the nostr circular, allowing a system operator to invest its own funds into the platform up to 30% of the outstanding credit stock. That is exactly the logic connecting the March 2026 equity raise with the 2026 budget. The company wants to use fresh equity not only as a buffer, but as an accelerator that supports both platform liquidity and new lending capacity.

Put simply, 2026 is a proof year. Not a breakout year, because too many pieces are still being put in place. Not merely a stabilization year, because the budget and the capital raise already point forward. It is a year in which the company has to prove three things at once, that it can bring platform fees back into growth, that it can restart direct lending without digging a new credit hole, and that it can turn Nawi Et Luzon from an impressive strategic channel into value that begins to matter at the listed-company shareholder level.

Risks

The Main Risk Is No Longer Lack Of Capital, But Misallocation Of Capital

After the March 2026 raise, the argument of outright capital shortage has weakened. Precisely because of that, the main risk has shifted. The question is no longer whether there is money. The question is how it gets used. If the company chases volume too quickly in order to justify the budget, it may pay for that in underwriting quality and future credit losses. If it stays too cautious, it may miss the window the new capital has opened.

Accounting Can Continue To Blur Operating Quality

2025 showed how easy it is to misread the numbers. The Leumi option swung heavily between quarters, old deferred revenue still contributed, and Nawi Et Luzon does not sit inside operating profit at all. That means 2026 will also require careful separation between operating profit, net profit, finance items, and the contribution of an equity-accounted JV. A company like this can look too cheap or too expensive simply because the accounting layers are moving differently from the operating business.

Litigation Remains A Real Cloud Even If Management Sounds Comfortable

The 2025 filings contain an unusual sequence of legal proceedings, including a 2021 class-action request for NIS 86 million, a 2023 action around the merger, a 2024 action challenging the way the platform was operated, and additional 2025 claims tied to financing agreements. In many of these cases, management and legal advisers say the probability of dismissal is higher than the probability of acceptance. Still, the auditor chose to include an emphasis-of-matter paragraph on contingent liabilities. That is an external warning signal worth taking seriously.

Weak Liquidity Can Amplify Any Miss

Even if the current short thesis is barely there, low liquidity means any disappointment or positive surprise can produce sharper stock moves. That is not a business problem by itself. It is a practical market constraint that changes how the stock behaves.

Conclusion

Luzon Credit leaves 2025 as a company that solved a large part of the old problem, but has not yet proved that the new model is working. Capital is back, the old withdrawal backlog is closed, Nawi Et Luzon already has a license and funding lines, and the accounting noise from the Leumi option is now smaller. On the other hand, the platform itself is still much smaller than before, direct lending has not yet returned at scale, and the product-responsibility legacy is still sitting on the balance sheet. The story now is less about survival and more about the quality of the next wave of execution.

Current thesis in one line: Luzon Credit has moved from defense to offense, but 2026 will be judged on underwriting and new revenue, not on the mere presence of new capital.

What changed versus the old reading: the severe liquidity problem of the platform has eased, and in its place the market now gets a new test, whether the company can originate high-quality credit and translate Nawi Et Luzon and platform nostr into listed-company shareholder economics.

The strongest counter-thesis: the market may be running too quickly after a comeback story when in reality the company has only swapped a liquidity problem for a capital-allocation problem, while the old core remains smaller and fragile.

What could change the market reading in the short to medium term: renewed growth in platform fees, rapid but disciplined expansion in the direct loan book, and the first signs that Nawi Et Luzon is creating accessible value rather than only strategic optionality.

Why it matters: this is a company trying to turn technology, licensing, and capital into a real operating comeback. If that works, 2025 will be remembered as a transition year. If not, it will be remembered as the year narrative got ahead of execution.

What must happen over the next 2 to 4 quarters: the platform must grow again without reopening product-responsibility losses, direct lending must return at a scale that can support the 2026 budget, and Nawi Et Luzon must start to matter economically at shareholder level. If one of those three stalls, the thesis weakens quickly.