Hachshara And Capital: How Much Real Headroom Exists Without Transition Relief
The main article argued that Hachshara’s bottleneck is not 2025 earnings but capital. This follow-up shows that the reported 114.6% solvency ratio with transition relief shrinks to only 102.0% without it, and that 2025 mostly replaced one capital layer with another rather than creating fresh headroom.
The main article already established that Hachshara’s bottleneck is not 2025 profit but capital. This follow-up isolates only that issue: how much real headroom remains once transition relief is stripped out, and what the 2025 bond redemptions and tier 2 raises actually did to that margin.
The answer is sharper than the headline solvency number suggests. With transition relief, Hachshara looks reasonable. Without transition relief, it is still sitting very close to the line. As of June 30, 2025, the ratio stood at 114.6% with the relief, but only 102.0% without it. That is not a cosmetic gap. It is the difference between a NIS 162.9 million capital surplus and only NIS 22.1 million. After the capital actions carried out between the calculation date and the publication date of the solvency report, the ratio with relief fell to 112.1%, while the ratio without relief remained 102.0%.
Four points frame the read:
- The real margin is only 2 percentage points above 100%. Without transition relief, surplus stood at only NIS 22.1 million against required capital of NIS 1.130 billion.
- This is not an MCR problem. Minimum capital stood at NIS 498.0 million, against NIS 822.1 million of capital for MCR purposes. The pressure sits one layer above that, in the gap above SCR and the distance from the distribution threshold.
- 2025 was mostly a replacement year. During the year, Hachshara redeemed NIS 200.0 million par of listed subordinated notes and raised NIS 170.0 million of subordinated bank instruments in parallel.
- The bar did not get easier, it got tighter. In the June 2025 table, the gap to the board’s 108% target was NIS 68.3 million, and in February 2026 the distribution threshold was updated to 110%.
It Is Not 114.6%, It Is 102.0%
The director’s report is effectively presenting three different pictures for the same capital base.
| Framework | Solvency ratio | Capital surplus or shortfall |
|---|---|---|
| With transition relief as of June 30, 2025 | 114.6% | NIS 162.9 million |
| With transition relief after capital actions | 112.1% | NIS 135.9 million |
| Without transition relief | 102.0% | NIS 22.1 million |
| Versus the board’s 108% target | 108.0% | NIS 68.3 million shortfall |
What matters most is not only the gap between 114.6% and 102.0%, but what happened in between. In the solvency disclosure, the company separately shows the impact of material capital actions between the calculation date and the publication date. Under transition relief, those actions reduced capital for solvency purposes by NIS 27.0 million and pushed the ratio down to 112.1%. Without transition relief, the same year of active liability management did not move the ratio at all. It stayed at 102.0%.
That is the core point. Once the relief is stripped out, 2025 did not open fresh headroom. It mainly kept the company above 100%. The distance between a NIS 22.1 million surplus and a NIS 68.3 million shortfall to the distribution target shows that Hachshara is not sitting in free excess-capital territory. It is sitting in minimum-compliance territory with only a very thin cushion above it.
It is also important to define what the problem is not. Hachshara does not look like a company brushing up against MCR. As of June 30, 2025, MCR stood at NIS 498.0 million, while capital for MCR purposes stood at NIS 822.1 million. In other words, the pressure is not about basic regulatory survival. It is about how much true room remains above SCR once the transitional crutches are removed, and how far the company still is from a point where that capital becomes distributable flexibility.
2025 Replaced One Capital Layer With Another
This is where the year’s financing actions matter. The business description and note 13 show a clear sequence. On January 1, 2025, the company fully redeemed the remaining NIS 42.92 million par of series 3 and also partially redeemed NIS 7.08 million par of series 4. On July 1, 2025, it completed another NIS 150.0 million par partial redemption of series 4. After the balance-sheet date, on January 1, 2026, it executed an additional NIS 8.896 million par partial redemption of series 4.
At the same time, the company raised three subordinated bank instruments: NIS 100 million on May 26, 2025, NIS 50 million on June 16, 2025, and NIS 20 million on November 27, 2025. All three are recognized as tier 2 capital, mature in 2033, have first-call points in 2030, and carry an interest step-up if the company does not exercise the early-call option at the specified dates.
| Layer | 2024 | 2025 | Change |
|---|---|---|---|
| Subordinated instruments from banks | NIS 345.0 million | NIS 515.0 million | NIS 170.0 million |
| Listed subordinated notes and bonds | NIS 212.8 million | NIS 12.1 million | Minus NIS 200.7 million |
| Subordinated instruments recognized as regulatory capital, book value | NIS 504.5 million | NIS 510.5 million | NIS 6.0 million |
That is the point in one table. At first glance, the new tier 2 raises look material. But once the full stock is examined, the picture becomes far less dramatic. The listed layer almost disappeared, while the bank layer increased in its place. In total, the book value of subordinated instruments recognized as regulatory capital rose from NIS 504.5 million to only NIS 510.5 million.
So after a full year of redemptions, raises, and maturity management, the company did not create a meaningful jump in net subordinated capital stock. It mostly changed the form of that capital. That still matters. It extends duration and shifts weight from the listed layer to the banking system. But it is not the same thing as creating new headroom above capital requirements.
The company itself says it may continue raising tier 2 capital or replacing existing tier 2 with longer-duration instruments. That language tells the reader the story has not yet moved from capital engineering to capital accumulation. Operationally, 2025 bought time and longer duration. It did not yet buy a wide cushion.
The Board Target Moved Forward, Not Backward
The most important number in the table is not 102.0% by itself, but what it means relative to the distribution gate. In June 2025, without transition relief, Hachshara was still NIS 68.3 million short of the board’s 108% target. So even after moving above the 100% line, it was not yet at the internal threshold needed for dividend capacity.
Then, in February 2026, the board updated the capital target so that no distribution would be allowed if the post-distribution solvency ratio falls below 110%. The change looks small in percentage terms, but not in meaning. On the June 30, 2025 base, a 110% threshold would have widened the gap to roughly NIS 90.9 million. At that point, the issue is no longer a thin surplus. It is a meaningful distance from accessible capital.
That also answers the headline question. Without transition relief, Hachshara’s real headroom is not NIS 135.9 million or NIS 162.9 million. It is only NIS 22.1 million above the required capital line, while a material gap still remains to the distribution target. Every financing action in 2025 needs to be read through that number. The redemptions and new issues were not generous add-ons on top of a wide base. They were active maintenance of the capital layer so the company would not remain stuck with a shorter listed subordinated layer.
This is also why the main article was right to insist that 2025 profit is not the end of the story. As long as the stripped ratio sits around 102% and the internal target now sits at 110%, the key question in the next reports will not be whether Hachshara produced another good earnings line. The real question will be whether those earnings start accumulating into hard capital, or whether the company keeps managing the margin through another round of tier 2 issuance and redemptions.
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