BlackEdge After The Rating Upgrade: When Will Lower Funding Costs Actually Reach Margin

What This Follow-Up Is Isolating

The main article already argued that BlackEdge improved the funding side faster than it repaired margin. This follow-up isolates the narrower question: through what exact path do lower funding costs move from the rating upgrade, the bank lines, the institutional loan, and the bond stack into net finance income.

The core point is that the relief has already started, but it is not moving across the balance sheet at the same speed. The rate cut and the new facilities lower the cost of floating debt, while the rating upgrade lowers the cost of the next layer of funding. They do not retroactively reprice the bonds already sitting on the books. So the move into margin runs through three clocks: a fast clock for floating debt, a medium clock for new funding channels, and a slow clock for the fixed-rate bond layer.

• The rating upgrade is a discount on the next shekel of funding, not a rebate on the old one.
• The fast relief sits on about NIS 352.0 million of rate-sensitive debt.
• The drag sits on about NIS 489.5 million of fixed debt, including NIS 421.5 million of bonds.

That chart matters because it frames the problem correctly. If the reader looks only at the rating upgrade or only at the rate cut, it is easy to assume the entire liability side became cheaper at once. That is not what the balance sheet says. On year-end 2025 balances, roughly 42% of the debt can reprice relatively quickly, while the rest, especially the bonds, only moves through maturity, refinancing, or replacement.

The Three Clocks Of Lower Funding Costs

The Fast Clock: Floating Debt Already Feels The Relief

The annual report describes the mechanism directly. The bonds carry fixed rates, while bank and institutional borrowing is mostly floating-rate. At the same time, most of the credit book itself carries fixed rates. That means a rate cut should first widen spread on the existing book, because the cost of funds moves down faster than the pricing of loans already originated.

The sensitivity table puts a number on that. A 1% decline in the Bank of Israel rate improves the funding cost on bank borrowing by about NIS 2.1 million and on variable-rate institutional and financial borrowing by about NIS 1.4 million, together roughly NIS 3.5 million on an annualized basis using year-end 2025 balances. So the cut from 4.25% to 4.0% on January 5, 2026 is roughly equal to about NIS 0.9 million of annualized relief before any customer repricing response and before any change in business volume.

This is exactly the part that can move quickly. It does not require bond refinancing to show up. Existing floating debt is enough.

The Medium Clock: New Funding Is Already Cheaper Than The Old Mix

This is where the rating and the early 2026 immediate reports enter. On January 1, 2026, S&P Maalot assigned an ilA- rating to an institutional loan of up to NIS 150 million. On January 19, 2026, the company reported a revolving facility enlarged to NIS 100 million at prime plus 1% to prime plus 2%. On March 18, 2026, it reported another NIS 100 million facility at prime plus 0.8% to prime plus 1.5%.

The point is not only that BlackEdge has more capacity. The point is that marginal funding already looks different. Section 17.1 of the annual report shows that bank and institutional sources rose to NIS 372.3 million in 2025 from NIS 159.9 million a year earlier, while non-bank sources fell to NIS 47.6 million from NIS 66.3 million. In other words, the funding mix shifted toward sources whose pricing structure is more compatible with rate cuts and quicker rollover.

Section 17.2 helps explain why new funding matters more than the headline. At year-end 2025, short-term bank borrowing carried a weighted average rate of 7.89%, short-term non-bank borrowing stood at 9.17%, and long-term non-bank borrowing stood at 6.96%. That does not mean every new shekel immediately lowers the average cost. It does mean the money entering the balance sheet now already arrives at a different price than the heavier legacy layers embedded in 2025.

The Slow Clock: The Bonds Still Set The Average

This is why margin should not jump all at once. At year-end 2025, BlackEdge had NIS 421.5 million of bonds outstanding at a weighted effective rate of 8.25%. Of that, NIS 82.1 million sat in current maturities and NIS 339.5 million remained long term. A layer like that does not reprice because of one rating event or one rate cut.

This is also the correct way to read the December 8, 2025 rating upgrade. S&P Maalot raised the issuer and bond ratings to ilA-. That is very important for future funding. But it does not reset the effective rate already embedded in series G, D, and E. It lowers the cost of the next issue, the next refinancing, and the next institutional loan. So the rating upgrade is a marginal-cost catalyst, not an automatic reset for the average cost of funds.

In practical terms, the liability side is now split in two. One layer is already reacting to lower rates. The other is still waiting for the maturity calendar.

When Does This Actually Reach Net Finance Income

The annual report already gives the interim answer. In 2025, finance income rose 4.0% to NIS 121.7 million, but finance expenses jumped 29.6% to NIS 57.4 million. So net finance income fell 11.6% to NIS 64.3 million, even though the net credit book grew 22.4% to NIS 958 million. In other words, 2025 captured a year in which balance-sheet growth still was not enough to outrun the cost of funds.

At the quarterly level, the first signs of stabilization are already visible, but not a full pass-through. Adjusted net finance income fell from NIS 20.1 million in the fourth quarter of 2024 to NIS 15.8 million in the first quarter of 2025 and NIS 14.6 million in the second quarter, then recovered to NIS 16.7 million in the third quarter and NIS 19.1 million in the fourth quarter of 2025. That is a stabilization path, not a completed margin reset.

The deeper point is that management itself says repricing to customers is gradual rather than immediate, in line with the duration of the credit book. That matters for two reasons. First, it explains why rate increases hurt spread faster than the company can fully reprice the asset side. Second, it means rate cuts do not move into the final margin in a straight line either. Some of the benefit stays immediately on the existing book, while another part filters through gradually into new origination, renewals, and customer pricing.

The composition of the asset book matters too. The company states that about 50.7% of the credit book is real-estate-backed financing, with a longer duration than other lending activities. So the asset side here is not a product that fully turns every month. The path into margin depends not only on whether new funding is cheaper, but also on how much of the existing book remains fixed-rate, how much of new business is repriced, and how much of the funding relief is retained by BlackEdge rather than passed to borrowers through competition or through a safer, lower-yield mix.

The Short Answer

Lower funding costs are already reaching margin, but they reach the edge first and the average later.

• The first signal should be lower finance expenses on floating debt and a higher share of new bank and institutional funding.
• The second signal should be adjusted net finance income moving above the fourth quarter of 2024 without weaker underwriting and without looser LTV behavior.
• The third signal will only come when the more expensive bond layer starts rolling off or being refinanced, and then average funding cost, not only marginal cost, will finally move.

So the answer to the headline is neither "right after the rating upgrade" nor "right after the rate cut." The real answer is: immediately on floating debt, within the next 2 to 4 quarters if pricing and volume remain disciplined, and only later at the level of the full average cost of funds. Until then, BlackEdge is still being tested on whether the relief on the liability side actually stays with the company instead of being absorbed by legacy bonds, competition, or a safer but lower-yield credit mix.