FIBI follow-up: Cal is no longer only an approvals question

Cal can still add up to about NIS 113 million of net gain for FIBI when the transaction closes, plus up to about NIS 52 million of additional future net gain. But the first quarter changed the quality of that wait. In the previous Cal analysis, the main issue was timing, approvals and the transaction's consideration structure. Now there are two developments that make the story less straightforward: the Competition Authority has extended its merger review several times, and El Al's frequent-flyer club has announced an early exit from the credit-card agreement at the end of 2026. That does not mean the transaction will fail, and it does not yet allow a quantified hit to Cal. It does shift the center of the debate. The immediate consideration still depends mainly on closing, while the contingent consideration depends on Cal's business performance in 2027 and 2028, exactly after the frequent-flyer club's exit point. Cal is therefore no longer just an asset waiting for regulatory approval. It is an asset that also has to pass a customer-concentration and future-profitability test before the market can give the bank full credit for the value.

Four layers decide how much value reaches FIBI

Cal is held by the bank at 28.2% of equity and 21.0% of voting rights, and FIBI carries the investment at NIS 896 million as of the end of March 2026. That is where the discussion starts, but it is not where it ends. The agreement under which Discount Bank sells control of Cal includes immediate consideration, adjustments, indemnities and a performance-linked contingent component. After the bank exercised its tag-along right, its Cal stake is expected to be acquired by Union only, with the total transaction consideration increasing accordingly.

This is why Cal should not be treated simply as a "capital gain on the way." The immediate gain matters, but it is not the whole story. The sharper question is whether the additional value, especially the contingent consideration, keeps the same quality as Cal enters 2027 and 2028 with a real threat to one of its notable card channels.

Timing matters as well. If the deal closes early, FIBI may receive the immediate gain before the club's impact becomes visible in Cal's numbers. If closing moves closer to the outside deadline, the buyers and seller will approach the table with more information about the commercial risk, and the adjustment and indemnity mechanisms may matter more.

El Al's exit hits the sensitive part of the consideration

The principles agreement between Cal and El Al was signed in December 2018 and became effective in September 2019, with a mutual exit right on December 31, 2026. In March 2026, the frequent-flyer club announced that it was exercising that right, and on the same date El Al reported a principles document with another company for issuing and operating credit cards for club customers. As of the end of March, club customers held about 381,000 active cards, about 9.3% of Cal's active cards, and their share of Diners activity was described as very material.

The 9.3% figure can look manageable if the reader looks only at Cal's total active cards. That is too narrow. Cal operates Diners exclusively in Israel, and the filing stresses that the club's cards are a very material part of Diners activity. The risk is therefore not only the loss of cards. It is a potential hit to a channel that gives Cal brand presence, customer utility and activity around a strong loyalty club.

Cal is not standing still. It is working on an alternative value proposition for club customers, including collaborations, and it has also initiated proceedings against El Al and the club after arguing that some actions already taken or planned breach the principles agreement. Some requested remedies were granted and some were rejected, and the parties are in mediation and arbitration. That leaves room for a fix, settlement or commercial solution, but it does not restore the previous state of the business.

This is the important read for FIBI shareholders: the new risk does not have to hurt the immediate gain to matter. It is enough for it to pressure Cal's expected profitability in 2027 and 2028, or to make the buyers and seller debate adjustment and indemnity mechanisms, for the contingent part of the consideration to deserve a lower probability. The bank's own share of Cal's pre-tax profit already declined to NIS 20.8 million in the quarter, from NIS 24.6 million in the corresponding quarter. That decline alone does not prove structural damage, but it arrives exactly when the quality of Cal's future earnings matters more.

The credit should stay tiered until proof arrives

The counterpoint is real. Cal still has a broad card base, the agreement with Discount Bank is expected to extend issuance and card-operation cooperation for ten years after closing, and 381,000 cards are not most of Cal's activity. Cal also says that at this early stage it is difficult to estimate the direct and indirect effect on future profitability.

That caveat does not eliminate the risk. It defines it properly. There is not enough disclosure to calculate how much profit Cal may lose, but there is enough disclosure to apply tiered credit: higher for the immediate gain if closing happens, lower for the contingent consideration while the club exit lacks a clear commercial solution. The next proof points are regulatory approval without a delay that pushes the deal toward November 1, 2026, and evidence that Cal can retain the club customers or replace the economic value of that activity before 2027 begins.