IBI Underwriting in the first quarter: underwriting strengthened, but distributions again absorb cash
Q1 2026 shows operating revenue almost doubling and net profit of NIS 18.3 million, but NIS 10.1 million came from Manor and NIS 52.7 million has already been allocated to distributions around and after the balance-sheet date. The core business read is stronger, but the liquidity test has become tougher.
IBI Underwriting opened 2026 with a quarter that proves two things at once: underwriting and distribution activity is again running at a high pace, but the company is still moving cash out of the balance sheet very quickly. Operating revenue almost doubled to NIS 30.9 million, net profit rose to NIS 18.3 million, and operating cash flow was NIS 19.4 million after a negative comparable quarter. That is a partly positive answer to the question left open in the previous annual analysis: whether 2025 was mainly a strong year for markups and capital markets, or whether the operating business had really moved to a higher run rate. Still, profit received a roughly NIS 10.1 million boost from Manor, and the board has already approved or declared NIS 52.7 million of distributions around and after the balance-sheet date, far above the quarter's profit and cash flow. The first quarter therefore improves the credit due to the core business, but it does not remove the central yellow flag: an underwriting house needs a liquid balance sheet to use market windows, and here a large part of that balance sheet continues to move to shareholders before it is clear whether Q1 deal activity can repeat in the next quarters.
Underwriting Answered The First Question Of 2026
The company is a relatively small underwriting house and investment-banking platform, active in distribution, underwriting, management, and coordination of securities offerings in Israel. It is not a financial company that mainly earns from credit spread, and it is not a pure investment company. Its economics sit on three sources: capital-market fees, gains or losses on securities acquired around underwriting and distribution, and a longer-term investment portfolio in which Manor has become the central asset.
The right classification for this quarter is a mix of margin machine and cash-return machine. When the primary market is open, operating revenue can rise quickly because the company does not need to expand a bank-like balance sheet to earn more. But to remain competitive in underwriting deals, it needs liquid capital, capacity to hold securities on its balance sheet, and a professional team that receives part of the upside. Reported profit alone is not enough. The key questions are how much profit comes from recurring fees, how much comes from asset revaluation, and how much cash remains after distributions.
Market data adds a practical screen: short interest was only 0.20% of float, so the debate is not a visible short-side objection. The question is whether a company that earns well from a warm market window can return capital aggressively without giving up balance-sheet capacity for the next cycle.
The strongest number this quarter is not net profit, but the source of revenue. Operating revenue was NIS 30.9 million, compared with NIS 15.9 million in the comparable quarter, an increase of about 94%. That is not a run rate to annualize, because underwriting depends on market windows and large deals, but it does show that the 2025 improvement did not disappear immediately at the start of 2026.
The comparison with the prior-year quarter also matters because of what did not happen on the balance sheet. Securities acquired in connection with underwriting and distribution declined to NIS 11.3 million, versus NIS 19.7 million at year-end 2025 and NIS 20.4 million at the end of March 2025. In cash flow, that released NIS 8.4 million. In other words, the quarter did not rely on building more underwriting inventory. That is positive for earnings quality: operating revenue rose while the short-term exposure to securities bought around deals actually fell.
The other side is that expenses rose at almost the same pace. General and administrative expenses were NIS 16.6 million, compared with NIS 8.7 million in the comparable quarter. Employee-related wage and benefit liabilities totaled NIS 25.8 million, up from NIS 23.6 million at year-end 2025 and about NIS 9.3 million at the end of March 2025. That continues the monitoring line from the team economics analysis: in an underwriting house built around people, a meaningful part of the upside reaches the team before it fully reaches shareholders. In a strong quarter that price is easier to absorb, but the next reports need to show whether the expense base contracts when deal activity cools.
Manor Still Carries Too Much Of The Bottom Line
The operating business strengthened, but the profit line is still not free of revaluation. Gains from long-term investments were NIS 9.8 million, versus only NIS 1.0 million in the comparable quarter. The material-events note nearly breaks this down completely: Manor is recorded at fair value of NIS 80.9 million after cumulative investment of NIS 46.1 million, and it generated a quarterly gain of about NIS 10.1 million.
The implication is simple but important. Profit before tax was NIS 24.7 million. Manor alone contributed an amount equal to about 41% of that figure, while the other level 3 investments recorded a NIS 0.4 million loss. The quarter therefore does not repeat the full 2025 problem, because underwriting activity itself is now stronger, but it also does not close the issue raised in the Manor analysis. Manor remains a material asset that lifts reported profit, but that value is still not the same as accessible cash.
There is also a change in the nature of the risk. At the end of March 2026, NIS 80.9 million of the NIS 98.8 million long-term investment portfolio was classified as level 2, mainly Manor, while another NIS 17.9 million was classified as level 3. A year earlier, all long-term investments were level 3. This improves measurement transparency relative to an internal model, but it does not solve the monetization question. Manor is already worth about 43% of the company's equity, so every strong Manor quarter also sharpens the dependence on one asset.
Cash Improved, Then The Board Reallocated It
The all-in cash picture initially looks good. Cash and cash equivalents rose to NIS 107.3 million, while short-term investments declined to NIS 15.4 million. Together, immediate liquid balances were NIS 122.7 million, compared with NIS 107.8 million at year-end 2025. Operating cash flow was NIS 19.4 million, after a negative NIS 1.9 million in the comparable quarter.
But the improvement did not come only from profit. The company realized a net NIS 42.0 million from short-term investments and received NIS 7.2 million in dividends, while it purchased NIS 1.9 million of long-term investments and invested NIS 1.3 million in an intangible asset. This is an all-in cash view, not a measure of normalized recurring profitability: it includes realizations and a shift from short-term assets into cash, not only cash generated by underwriting activity.
| All-in cash view around the report | NIS million |
|---|---|
| Cash and short-term investments at March 31, 2026 | 122.7 |
| Dividend declared in March and paid in April | (14.4) |
| Dividend approved on May 17, 2026 | (18.3) |
| Additional capital-reduction distribution approved on May 17, 2026 | (20.0) |
| Pro forma liquid balance before other Q2 movements | 70.0 |
This table is not a forecast of cash at the end of Q2. It shows the immediate price of the capital policy, before additional operating activity. The NIS 14.4 million dividend was already recorded as a liability at the end of March and paid on April 13. Then, on May 17, the board approved an additional NIS 18.3 million dividend and another NIS 20.0 million distribution under the court-approved capital reduction. Together, NIS 52.7 million is set to leave or has already left the cash balance around the report, about 43% of immediate liquid balances at the end of March.
That reinforces the conclusion from the capital-allocation analysis: the company still has a strong balance sheet and no bank or bond financial debt weighing on it, but the pace of distributions turns liquidity into a business question, not only an accounting one. If the issuance market remains open, the balance sheet can be rebuilt through cash flow and deals. If the window cools, the same distribution policy will look less like a return of surplus and more like a reduction in flexibility.
Conclusion
Q1 makes 2026 a proof year, not a reset year. The fee engine worked, exposure to securities acquired in connection with underwriting declined, and operating cash flow turned positive. Those are three positive answers to the questions left open after 2025.
Still, Manor contributed a large share of profit, team-related expenses remained high, and the distributions around and after the report absorb a large amount relative to quarterly profit and liquid balances. The current conclusion is that the company looks better operationally, but less balance-sheet-flexible than the end-March jump in cash suggests. For the read to improve, the next two to four quarters need to show a sequence of operating revenue, relatively low underwriting inventory, and no further erosion of liquid balances after large distributions. What would weaken it is a soft underwriting quarter alongside high team expenses and another large distribution.
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