First International Issuances in Q1 2026: the funding window worked, but short funding stayed central
First International Issuances raised about NIS 2.83 billion in March 2026 through bonds and commercial paper, proving that market access is still open. But the balance sheet jumped to NIS 9.68 billion, equity barely moved, and the short-duration funding layer became larger.
The first quarter of First International Issuances closes an important part of the test that opened at the end of 2025: the company turned a shelf prospectus and rating notices into an actual NIS 2.83 billion raise, almost all of it in one March 2026 window. That is a clear positive signal for the funding arm of First International Bank, especially after the prior concern was the refinancing of the large commercial paper layer due in 2026. Still, the transaction does not make the story cleaner. The balance sheet grew 41.7% in one quarter to NIS 9.68 billion, equity rose by only NIS 32 thousand, and commercial paper already stands at NIS 3.48 billion. Net profit almost disappeared, but that is not a new operating weakness. It is mostly the accounting cost of a larger balance sheet, through an NIS 860 thousand expected-credit-loss provision. The current read is therefore mixed but clear: the market window worked, ratings stayed strong, and the back-to-back structure still holds, but the company is building a much larger liability base without a wider independent equity cushion. In the next reports, the market will look less at profit growth and more at refinancing cost, rating stability, and decisions around the short and subordinated debt layers.
The March Issuance Proved Market Access, Not A New Model
First International Issuances is not an operating bank and not a credit company that earns its own customer spread. It raises commercial paper, bonds and subordinated notes, then deposits the proceeds at First International Bank under terms matching the securities issued. It is a funding conduit: when the structure works, the balance sheet lines expand, but the profit that remains at the company itself should be small.
The point that can be missed in the first quarter is that the main event is not the drop in profit from NIS 558 thousand to NIS 32 thousand. The main event is that the company expanded its balance sheet from NIS 6.84 billion at the end of 2025 to NIS 9.68 billion at the end of March 2026, with almost no change in independent equity. Matching deposits at First International Bank stand opposite the liabilities, so this is not ordinary operating leverage. But it still changes the market test: the larger the balance sheet, the more rating quality, investor demand and timely refinancing matter.
With no traded equity security, the quarter should be read through debt: NIS 1.008 billion of commercial paper series 3, NIS 1.825 billion of series 14 bonds, and equity of only NIS 33.34 million against a NIS 9.68 billion balance sheet.
On March 23, 2026, the company issued NIS 1.007894 billion par value of commercial paper series 3, and NIS 1.825412 billion par value of series 14 bonds. The proceeds were deposited at First International Bank under terms matching the issued series. The commercial paper carries floating interest based on the weighted average of the Bank of Israel rate plus 0.02%, while series 14 is CPI-linked, carries a fixed 2.14% coupon, and is repaid in one bullet payment on September 23, 2029.
This raise gives a practical answer to the concern raised in the prior analysis of the 2025 commercial paper layer, published as analysis 1852: could the company show market access well before the September and November 2026 maturities. March 2026 gives a first positive answer. Midroog updated its rating envelope to NIS 1.85 billion for series 14 bonds and NIS 1.05 billion for commercial paper series 3, while S&P Maalot affirmed ilAAA for bonds of up to NIS 1.83 billion and ilA-1+ for commercial paper of up to NIS 1.01 billion. The company used almost the full updated frameworks.
But the raise did not erase refinancing risk. It proved the market was open, and it also extended part of the funding profile through series 14 to 2029, but it increased the commercial paper layer at the same time. Commercial paper rose from NIS 2.44 billion at the end of 2025 to NIS 3.48 billion at the end of March 2026. The company did not only return to the market. It returned with the same short-duration tool that made 2026 a proof year.
The chart shows the right change: issuing series 14 restored meaningful weight to longer-duration funding, but did not reduce the short layer. Commercial paper still represents about 36% of the three financial liability layers, almost the same as at the end of 2025. Timing risk has not disappeared.
Net Profit Nearly Vanished Because The Larger Balance Sheet Has An Accounting Cost
The drop in net profit from NIS 558 thousand in the comparable quarter to NIS 32 thousand in the first quarter of 2026 looks severe. It is severe, but it does not point to a broken funding model. Financing income totaled NIS 51.4 million and financing expenses were nearly identical, leaving only NIS 51 thousand of net financing profit before tax.
The more interesting reason sits in a smaller line. The expected-credit-loss provision rose to NIS 860 thousand, versus only NIS 1 thousand in the comparable quarter. Because the provision is recorded inside financing income, it almost wipes out accounting profit. If the provision is added back only to understand the mechanism, net financing profit before that provision was about NIS 911 thousand, compared with about NIS 886 thousand in the comparable quarter. This is not an adjusted earnings figure that replaces reported profit. It shows that the underlying spread did not really break. The balance sheet grew, and the accounting risk cost grew with it.
Cash flow confirms the same point. Operating cash flow was NIS 1.213 million, but the all-in cash picture matters more: the company raised NIS 2.833 billion in financing activity and deposited almost the same amount at First International Bank. Cash on hand rose to only NIS 2.223 million. This is not a new independent liquidity cushion, but the normal result for a conduit company.
The Equity Cushion Did Not Move While Liabilities Jumped
The first quarter strengthens the structural thesis more than it strengthens the earnings line. Total liabilities rose to NIS 9.65 billion, while equity stood at NIS 33.34 million. Equity to assets declined from about 0.49% at the end of 2025 to about 0.34% at the end of March 2026. This is not an immediate debt-service problem because the company operates under a back-to-back structure. But it does mean the company is not building an internal absorption layer alongside the expansion.
The current asset and current liability position also remains tight. Current assets totaled NIS 3.762 billion versus current liabilities of NIS 3.726 billion, a surplus of about NIS 36.6 million. At the end of 2025, the equivalent surplus was about NIS 36.7 million. The balance sheet grew quickly, but the current surplus did not grow with it. That is the model itself: tight matching, very little independent cash, and full dependence on matching deposits being repaid on time.
The trust deed for series 14 adds an important risk layer. On the one hand, First International Bank undertook toward the company and the trustee to fulfill all terms of the bonds held by the public, and that undertaking cannot be canceled or changed. On the other hand, the bonds are not secured by collateral, and the trustee has no right in the company's deposits at the bank. The protection is therefore strong contractual and bank support, not external collateral that isolates holders from bank risk.
The rating agencies still support the positive read: ilAAA by S&P Maalot and Aaa.il by Midroog for bonds, ilA-1+ and P-1.il for commercial paper. Both agencies flagged the military escalation that began on February 28, 2026 as a macro uncertainty, while the company assesses no material effect because its funds are deposited at First International Bank. The company structure may be insulated, but debt pricing can still react to rating tone and demand.
What Will Decide The Next Quarters
The first quarter is a partial proof quarter, not a full conclusion. The positive proof is a large issuance, at strong ratings, close to the updated approved frameworks. That weakens the concern that the company could face 2026 without market access. But the same positive proof came together with a larger balance sheet, a larger commercial paper layer, and equity that barely changed.
The rest of 2026 will be tested through three points: the price and flexibility of commercial paper refinancing around series 1 and 2, management of the subordinated layer through the series 25 window in June to July 2026, and continued rating stability without a new risk premium.
The current conclusion is that the structure worked better than a skeptic would have assumed, but it did not become less market-dependent. First International Issuances showed real funding access versus the open questions at the end of 2025. On the other side, almost every new shekel passes through the same conduit to First International Bank, and the company still has a very narrow independent equity base. The market will continue to read the company through bank support, debt pricing and rollover timing, long before it cares about a profit line of a few tens of thousands of shekels.
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