PaymenT in the First Quarter: Loan Sales Shrink the Balance Sheet, Credit Quality Still Sets the Test

PaymenT opened 2026 with a quarter that answers part of the open questions from prior coverage, but it does not make the story fully clean. The roughly NIS 80 million loan portfolio sale was completed in February, and the March-end balance sheet already shows lower customer credit held for sale and lower short-term bank credit, despite roughly NIS 134 million of new originations during the quarter. That is a real improvement in the model: the company did not only originate credit and talk about selling portfolios, it actually moved part of the credit off the balance sheet and reduced bank funding with it. Still, this was not a full breakout quarter. Originations fell by about 15% versus the previous quarter, finance expenses doubled because average credit-line utilization was higher, and the delinquency table shows that a roughly 1% default rate is not the only credit-quality number to watch. The current read is more positive on the company's ability to recycle capital, but it still depends on two conditions: recurring loan sales at a high enough pace, and an early-delinquency layer that does not migrate into broader credit default.

The Model Is Starting to Release Balance Sheet Pressure

PaymenT is a fintech company that provides point-of-sale consumer credit through merchants. Its platform is embedded in hundreds of businesses, mainly in aesthetics, surgical aesthetics, dentistry, equipment, home improvement and tuition. The company's economics are not just interest income on credit. They combine platform fees, interest and linkage income, sales of loans to financial institutions, and servicing of portfolios that have already been sold.

That matters because the prior Deep TASE article on the lighter-capital model left one core question open: is the company truly turning originated credit into an asset that can be sold externally, or is growth still mostly coming through a balance sheet that has to keep expanding? The first quarter provides a partial but meaningful answer. Customer credit held for sale fell from NIS 186.7 million at the end of 2025 to NIS 158.1 million at the end of March 2026. Short-term bank credit fell from NIS 104.2 million to NIS 79.3 million. At the same time, the total managed credit portfolio rose to NIS 495.5 million, while the portion already assigned to third parties and serviced by the company increased from NIS 288 million at the end of 2025 to NIS 332.5 million.

This does not mean the company instantly became an asset-light platform. It still carries NIS 163 million of credit on its books, and it still uses short-term bank credit to support the origination cycle. But the quarter closes an important checkpoint: the loan assignment did not remain an intention around the annual report. It flowed into the numbers. If that pace repeats over the next few quarters, the model becomes easier to scale. If it does not, growth will again put more pressure on the balance sheet.

The company's market cap was around NIS 281 million based on the latest trading data, and short interest adds almost no independent pressure: short interest as a share of float is close to zero. Near-term market reaction is therefore mainly about whether this balance-sheet improvement repeats, rather than about technical pressure from short positions.

Revenue Is Moving Toward Fees, but Funding Cost Still Shows Up

Quarterly revenue rose to NIS 14.4 million, up 25% year over year. Gross profit rose to NIS 12.5 million, operating profit to NIS 5.6 million, and net profit to NIS 4.1 million. Those are good numbers, but their quality matters more than the headline: most of the improvement came from platform-use and loan-origination fees, which rose to NIS 8.1 million from NIS 5.5 million in the comparable quarter.

That component is now about 56% of revenue, compared with about 48% in the comparable quarter. It supports the view that the company is deepening the fee layer around each transaction, including through the 360 platform and additional merchant products. On the other hand, revenue from loan realization and fair-value changes fell to NIS 2.8 million from NIS 3.7 million. In other words, the quarter's growth was not just the result of selling loans at better economics. It increasingly came from operational and fee income around platform usage.

The less comfortable side is funding. Finance expenses rose to NIS 1.6 million, more than double the comparable quarter, mainly because average credit-line utilization was higher, even as funding costs improved with the banks. Average short-term bank credit during the quarter reached NIS 91.8 million, versus NIS 30.9 million in the comparable quarter. The period-end balance sheet looks better than the average cost carried through the quarter, and that is exactly the gap to monitor: portfolio sales reduced debt at period-end, but earnings still carry the cost of warehousing credit before it is sold.

Cash flow was better than the weakness seen in 2025. Operating cash flow was NIS 4.5 million, above net profit of NIS 4.1 million. On an all-in cash flexibility basis, after actual cash uses, the company generated NIS 4.5 million from operations, invested about NIS 1 million, paid a NIS 2 million dividend and repaid about NIS 0.2 million of lease liabilities. The result was a NIS 1.3 million increase in cash. This was a quarter in which profit reached the cash account, but the company approved another NIS 2 million dividend after the balance-sheet date. The quarterly dividend policy of at least 30% of net profit remains part of the equity story, but it requires portfolio sales and cash generation to keep working together.

Credit Quality Needs More Than One Default Number

PaymenT highlights a low default rate of about 1%, externally verified by the financial institutions that purchase loans from the company. That is an important number, but the quarter shows it is not enough by itself. The March 31, 2026 aging table shows a NIS 163.1 million portfolio: NIS 155.5 million not past due, NIS 4.2 million past due by 1 to 90 days but not in credit default, and NIS 3.3 million in defaulted loans.

The table does not necessarily contradict the default rate the company presents. It does mean investors need to understand which denominator each metric uses. A roughly 1% default rate may be valid under the company's measurement and across the broader sold portfolios reviewed by purchasers, while the balance-sheet credit table still contains a layer that is not fully clean. That distinction matters precisely because the model depends on selling portfolios. As long as loan purchasers continue to verify low default rates, the company can sell credit under conditions that support growth. If the early-delinquency layer widens or migrates into default, both the portfolio's fair value and purchaser appetite can change.

There is also an important macro mechanism. Most of the loans the company grants are fixed-rate and CPI-linked, while bank funding is prime-based and not CPI-linked. Inflation supports interest and linkage revenue, but can also increase borrowers' monthly payments and raise credit losses. Lower interest rates can reduce funding costs, but may also affect the consideration in loan-assignment transactions. In the company's sensitivity disclosure, a 0.5% CPI move affects customer credit held for sale by about NIS 0.8 million, and a 0.5% rate move affects bank credit by about NIS 0.4 million. PaymenT's profitability is therefore not only a function of origination volume. It depends on the spread between credit pricing, funding cost and collection quality.

Conclusions

The first quarter strengthens PaymenT's story, but more precisely than the headline numbers suggest. Revenue and profit rose, operating cash flow supported net profit, and the loan sale reduced both balance-sheet credit and short-term bank debt. That improves the evidence that the company can keep growing without requiring each new shekel of activity to expand the balance sheet at the same pace.

Still, this is a proof quarter rather than an endpoint. Originations fell versus the previous quarter, finance expenses still reflect high average use of credit lines, and the delinquency table requires a wider monitoring lens than the official default rate alone. Over the next few quarters, the market is likely to measure three things: whether additional loan sales recur at a pace that reduces balance-sheet pressure, whether cash flow remains close to profit after dividends and investments, and whether the 1 to 90 day delinquency bucket stays controlled rather than feeding broader credit default. If those three line up, the company read becomes cleaner. If one breaks, especially credit quality or the pace of portfolio sales, revenue growth will be less convincing.