Shoham Bizness in the First Quarter: Profit Holds, but Deep Delinquencies Keep Rising
Shoham Bizness opened 2026 with nearly stable profit and positive cash flow, but loans more than 180 days past due kept rising even as the total book stopped growing versus year-end 2025. The quarter strengthens the question of whether funding and dividends are backed by a stabilizing loan book or by time bought until collections prove the collateral.
Shoham Bizness did not publish a bad quarter: revenue barely moved, net profit remained around NIS 10 million, operating cash flow was positive, and cash increased. The problem is that the quarter did not close the question raised in the 2025 annual analysis: whether the credit book is truly stabilizing in quality, or whether profit still depends on collections and collateral that have yet to prove themselves. Precisely while gross customer credit edged down versus year-end 2025 to NIS 1.04 billion, debts more than 180 days past due rose to NIS 118.1 million, of which NIS 26.8 million were not classified as impaired. This does not disprove management's view: the company has bank lines, cash, and unused facilities that cover the coming year's bond principal, and specific provisions increased. But it does mean that the first quarter provides time, not full proof. The next few quarters need a simple outcome: a decline in deep delinquencies through collection, settlement, or stricter classification, while funding sources remain available without cash distributions running ahead of capital retained in the business.
Short-Duration Credit, Longer Collection Risk
The company is a non-bank lender focused mainly on check discounting and short-term credit. The business is built on the spread between its funding cost and the return on customer credit, and on the ability to turn a short-duration book back into cash without being stuck with a long collection tail. That is why a figure like "around 60% of the book due within 90 days" matters, but it is not enough. In a lender like this, business quality is determined mainly by what happens to the part that does not pay on time.
The investor framing emphasizes three points: a credit book close to NIS 1 billion, short duration, and diversified funding sources. That framing is legitimate. At the end of March 2026, net customer credit stood at NIS 967.5 million, equity stood at NIS 228.5 million, and the company had about NIS 700 million of bank credit lines alongside about NIS 280 million of lines from non-bank credit providers. Its bond is rated Baa2 with a stable outlook, and the company reports compliance with bank and bond covenants.
Still, available funding does not replace credit quality. Delinquencies, collateral, and debt restructurings are normal in this sector, but the increase in deep delinquencies while the total book did not grow versus year-end 2025 is not just routine noise. It brings the focus back to the open question from prior coverage: whether collateral and collection procedures will actually reduce the problematic balances, or only allow loss recognition to move gradually.
The Better Line Is Not the Cleanest One
Finance income in the first quarter was NIS 40.8 million, up only about 1% from the comparable quarter. Finance expenses rose faster to NIS 19.0 million, so net finance income fell to NIS 21.8 million from NIS 22.7 million. Profit before credit losses did not improve.
The better-looking line is credit loss expense: it declined to NIS 4.4 million from NIS 5.6 million in the comparable quarter. That allowed net finance income after credit losses to rise slightly to NIS 17.4 million, while net profit was NIS 10.1 million compared with NIS 10.7 million. This is reasonable stability, but it rests on a lower period credit-loss charge while the credit note itself still shows growth in the deeper risk layer.
The chart explains why the quarter is not clean. Debts more than 180 days past due rose to NIS 118.1 million, compared with NIS 99.5 million at year-end 2025 and NIS 79.3 million in March 2025. In other words, this layer grew by about 49% in one year, while the gross credit book grew by only about 8%. Compared with year-end 2025, the book declined slightly, but deep delinquencies increased by about NIS 18.6 million.
The more sensitive point is classification. Of the debts more than 180 days past due, NIS 26.8 million were not classified as impaired, compared with NIS 21.5 million at year-end 2025 and NIS 14.8 million in March 2025. The company attributes this to collection processes, offsets, repayment arrangements being paid as scheduled, debtor cooperation, and legal feasibility of collection. That may be right, but for investors this is no longer a background issue. It is where the next quarters need to show cash collected or stricter classification.
On the positive side, the specific provision for impaired debts increased to NIS 19.1 million from NIS 15.7 million at year-end 2025. Total provisions also increased to NIS 29.2 million. But the specific coverage ratio on debts more than 180 days past due is about 14.4%, compared with about 15.0% at year-end 2025 and about 18.6% in March 2025. This does not mean the provision is necessarily too low, because the company relies on collateral and collection procedures. It does mean the market will not get the full answer from net profit alone.
Funding Is Open, but Cash Returns Reduce the Margin for Error
Operating cash flow was NIS 57.8 million in the quarter, compared with negative NIS 53.3 million in the comparable quarter. In a credit business, however, this is not a clean measure of recurring profitability. It is affected by movement in customer credit, bank and supplier funding, and the decision to grow or shrink the book. In this quarter, it was supported by short-term bank credit and a decline in net customer credit.
The relevant cash frame is therefore all-in cash flexibility after real uses of cash: cash, unused lines, bond principal, dividends, and buybacks. On that basis, the quarter looks more comfortable than year-end 2025, but not free of pressure.
| Item | Current Position | Economic Meaning |
|---|---|---|
| Cash and equivalents at the end of March | NIS 142.4 million | A sharp increase from NIS 81.1 million at year-end 2025 |
| Cash and unused lines near publication | about NIS 250 million | Comfortable coverage versus about NIS 72 million of bond principal over the next year |
| Bank lines | about NIS 700 million | Broad funding source, but mostly short-term credit backed by checks |
| Dividends around the report | about NIS 10 million | Two NIS 5 million distributions, nearly equal to quarterly profit |
| New buyback frameworks | up to NIS 30 million in shares and up to NIS 50 million in bonds | A confidence signal, but any actual execution competes with capital needed for the book |
| Controlling shareholder guarantee ceiling | increased to NIS 350 million | Improves access to funding, but also shows that the system still relies on a personal support layer |
The dividend and buybacks are not a problem by themselves. A profitable company with a stable rating, unused credit lines, and a short book can return cash to shareholders. The yellow flag is timing: two NIS 5 million distributions around the report arrive while deep delinquencies are rising, and the company is renewing buyback frameworks far larger than the amount actually executed so far. Until collections reduce the problematic layer, capital allocation will be judged less by management's confidence signal and more by how much capital remains in the business.
The funding structure also deserves a sober read. The three banks provide lines priced at prime plus 0.6% to 0.65%, and the company is in covenant compliance. On the other hand, the lines are short-term, part of them is non-binding, and they rely on 125% check coverage and personal guarantees from the controlling shareholder. That is a source of strength while the market stays open, but it also means the ability to keep growing and distributing cash depends heavily on funders' confidence in the quality of the credit book.
Collections Matter More Than Book Growth Now
The first quarter frames 2026 as a proof year for credit quality, not a year for growth at any cost. Profit still holds, funding sources are open, and the company does not show distress signals. These are positive points. But the real progress has to come from the debts more than 180 days past due: collection, settlement, collateral realization, or stricter classification. Without that movement, every profitable quarter will still carry the question of whether accounting loss recognition is arriving late.
The counter-thesis deserves attention: the company may be right, and the non-impaired portion may be sufficiently collateralized or already in real collection tracks. The book is short, 81% of non-delinquent credit is expected to mature within 180 days, and unused lines cover the coming year's principal payments. If deep delinquencies begin falling in the first half of 2026 without a jump in credit losses, the first quarter will look in hindsight like a reasonable transition period. If they continue to rise, quarterly profit and the dividend will be less persuasive than the question of how much capital and funding are needed to finish the collection process.
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