Max It in the First Quarter: The Credit Book Keeps Growing, but Margin and Risk Still Restrain Profit

Max It opened 2026 with net profit almost unchanged from the comparable quarter, NIS 80 million versus NIS 79 million, and that is not the most important part of the quarter. The company is still expanding its credit base and card base, renewing large funding lines, and keeping comfortable regulatory capital ratios, but it still has not turned credit-book growth into a clear profitability step-up. Net interest income rose only 5% while credit to private customers was up 14% from March 2025, and the interest appendix explains why: volume helped, but price erased a large part of the benefit. Credit quality also does not give a clean close; charge-off metrics improved against the comparable quarter, but problematic credit and credit not rated as performing are still higher than both a year ago and year-end 2025. The first quarter does not break the positive read on the company, but it also does not close the two questions left open after 2025: whether credit growth can produce better margin, and whether lower losses reflect cleaner underwriting or simply a safer book. Over the next few quarters, the proof will mainly come from the gap between credit-book growth and net interest income, the broader credit-quality indicators, and the ability to keep rolling the funding structure without increasing the cost of capital.

Profit Stayed Stable, but Margin Has Not Caught Up With the Book

Max is a credit-card issuer, acquirer, and consumer and business lender. Its two main engines are card issuance and credit to private customers on one side, and acquiring plus financial solutions for merchants on the other. Because this is not a standard listed-equity screen with an active traded share line, the economic read is mainly about issuer quality, debt, capital, and credit risk. The company generated NIS 591 million of revenue in the first quarter, up only 1% year over year, and net profit was NIS 80 million. Return on equity of 14.1% is still good, but it is below 15.1% in the comparable quarter.

The growth is real. Valid cards rose to 4.279 million from 3.978 million in March 2025, and card transaction volume increased to NIS 37.390 billion from NIS 36.207 billion. The credit book also continued to expand: credit to private customers reached NIS 12.274 billion, up 14% from March 2025 and 2% from year-end 2025. Yet card-transaction revenue barely moved, NIS 375 million versus NIS 374 million, and foreign-transaction fee income fell to NIS 41 million from NIS 45 million.

The unusual point in the quarter is the gap between activity volume and profit. The issuing segment improved to net profit of NIS 40 million from NIS 34 million in the comparable quarter, mainly due to higher net interest income. The acquiring segment fell to net profit of NIS 40 million from NIS 45 million, as card-activity revenue in acquiring declined despite higher business activity, mainly because of competition. Operation "Shagat HaAri" hurt issuance and acquiring volumes in March, especially foreign activity, but it does not explain the whole picture by itself. Even without the security event, the quarter shows that part of the growth is still being absorbed by price, competition, and risk cost.

In the previous annual analysis, the central question for 2026 was whether net interest income would start moving closer to the pace of credit-book growth. The first quarter gives a mixed answer. On one hand, net interest income increased to NIS 214 million from NIS 204 million. On the other, average credit balances grew much faster: total average credit stood at NIS 15.862 billion, versus NIS 14.051 billion in the comparable quarter, up about 13%.

The interest appendix is sharper than the headline line item. In credit to private customers, the average balance rose to NIS 12.201 billion from NIS 10.590 billion, but interest income rose only to NIS 274 million from NIS 270 million. For total credit, the income yield declined to 8.20% from 9.14%.

The precise story is not "no growth"; it is "growth is still not expensive enough." The analysis of changes in interest income and expense shows that net interest income benefited by NIS 32 million from quantity, but lost NIS 22 million from price. Credit-book growth is working in the company’s favor, but it is not fully flowing through to financing profitability. At the same time, the growing public-debt and commercial-paper layer improves funding flexibility, but also requires more sensitive management of duration and price.

That is the quarter’s economic bottleneck. A growing credit company can expand the book, but when credit volume rises at a double-digit pace and net income from that credit rises at a lower single-digit pace, the reader should be careful about a quick read of growth. The next quarters need to show whether this is mainly a temporary rate and mix effect, or a sign that competition and pricing limit the quality of growth.

Better Loss Metrics Still Lean on a Safer Mix

Credit-loss expense rose to NIS 55 million from NIS 46 million in the comparable quarter. This does not necessarily mean a sharp deterioration in the current quarter. The comparable quarter was unusually favorable because risk metrics had improved significantly. Still, the broader indicators are less clean than the charge-off line.

The net charge-off ratio fell to 0.97% from 1.31% in the comparable quarter, which is positive. But problematic credit rose to 3.72%, versus 3.64% in March 2025 and 3.71% at year-end 2025. Credit not rated as performing rose to 6.89%, versus 6.37% in March 2025 and 6.74% at year-end 2025. Non-accrual debt also rose to NIS 196 million, from NIS 187 million at year-end 2025 and NIS 180 million in March 2025.

The previous credit analysis flagged that lower losses seemed tied partly to a faster shift toward vehicle-secured credit. The first quarter strengthens that read rather than closing it. Vehicle-secured credit reached NIS 4.814 billion, versus NIS 4.535 billion at year-end 2025 and NIS 3.638 billion in March 2025. Within interest-bearing credit to private customers, it is already about 39%.

The current conclusion is cautious: loss metrics do not signal a break, but they also do not prove that underwriting improved across the whole book. The company may simply be building a book with more collateral, which is sensible risk management. The distinction matters because a safer book reduces expected losses, but does not necessarily produce the same yield as less secured credit. If problematic credit and credit not rated as performing keep rising while charge-offs stay low, investors will need to separate underwriting improvement from a change in collateral mix.

Funding and Capital Buy Time, While Tax and Legal Noise Remain

The quarter gives Max a good funding point. In January 2026, the company extended secured credit facilities of NIS 3.3 billion and NIS 2.1 billion until January 2027. In February, it extended another NIS 750 million facility until February 2027, and after the balance-sheet date it extended a NIS 2.4 billion facility until May 2027. All were extended without a material change in terms. This is not independence from the banks, but it does confirm that the banking system continues to provide the company with meaningful liquidity access.

The capital-market layer also continues to grow. Bonds, subordinated notes, and commercial paper increased to NIS 1.945 billion from NIS 1.647 billion at year-end 2025 and NIS 971 million in March 2025. The quarterly increase mainly came from a public commercial-paper issuance of NIS 300 million par value, at 0.06% above the Bank of Israel rate, for one year with no renewal option. After the balance-sheet date, the company repaid other commercial paper of about NIS 207 million.

Capital also looks relatively comfortable. The CET1 ratio rose to 10.4% from 10.2% at year-end 2025, and the total capital ratio rose to 13.4% from 13.0%. But part of the improvement came from a non-operating source: a new operational-risk capital rule improved the capital ratios by about 0.3%. At the same time, in March the board lowered the internal CET1 target to 9.0% from 9.25% and approved a NIS 56 million dividend, about 30% of 2025 net profit.

Funding does not look like the immediate problem for 2026, but it still sets the pace of growth. Unlike a regular operating company, Max must fund the expansion of the credit book itself. All-in cash flexibility in the quarter reflected operating cash flow of NIS 106 million, net credit extended of NIS 268 million, equipment purchases of NIS 34 million, a NIS 56 million dividend, and a NIS 300 million public debt issuance. The quarter ended with higher cash only because the company combined operating cash generation with new debt issuance. That is not a weakness by itself in a credit company; it is a reminder that growth depends on continuous funding access.

The VAT ruling did not hit quarterly profit the way it hit 2025, but it has not disappeared. The provision at the end of March 2026 covers the three VAT assessments and the following periods through March 31, 2026, including interest and linkage. The company still estimates that the effect on future profits is not material, but that estimate is based on the ongoing study and implementation of a complex ruling. The quarter therefore increases confidence that the event did not immediately reopen in the income statement, but it does not close the debate over the quality of foreign-activity revenue and foreign-currency transaction fees.

The direct-marketing class action also returned to a review track after the Supreme Court partially accepted the appeal in February 2026 and returned certain causes of action to the district court. The exposure cannot be estimated, so it is not included in the company’s additional legal exposure for claims whose probability is not remote. For a financial issuer with quarterly profit of about NIS 80 million, a tax event or unquantified claim can change earnings quality faster than it changes activity volume.

Conclusion

Max’s first quarter was not weak, but it also did not remove the yellow flags. The company is still growing, renewing funding sources, and maintaining comfortable regulatory capital, which is enough to keep the story stable. The problem is that credit-book growth has not yet fully translated into net interest income, and the broader credit metrics still do not give clean proof of underwriting improvement.

The current read is that Max is in a proof year, not a breakout year. For the read to improve over the next few quarters, three things need to happen: net interest income must rise closer to the pace of credit-book growth, problematic credit and credit not rated as performing must stop climbing, and funding sources must continue to lengthen without a sharp increase in price. The counter-thesis is that the caution is too harsh: the company still generates double-digit ROE, has functioning access to banks and capital markets, and is building a safer book with a higher share of vehicle-secured credit. But as long as much of the improvement comes from mix, regulatory treatment, and continued funding access, the market will need another quarter or two before reading 2026 as a full-quality improvement rather than controlled growth.