CALLPOLI.TA22 days ago6.8Kviews

Bank Hapoalim: the non-spread businesses have compounded through the cycle

Fee lines grew through a period when spread income did not, which is what a diversified franchise is supposed to do and rarely does.

Gabriel Stern@gabriel_stern

Evidence · 5 cards

The case

Bank Hapoalim: the non-spread businesses have compounded through the cycle

Fee lines grew through a period when spread income did not, which is what a diversified franchise is supposed to do and rarely does.

The edge

The Street says

Consensus models the cycle turning in the second half
Sell-side target clusters within 8% of spotAuto

I say

The turn already happened in order intake two quarters ago
My number is 14% above the street on the out yearCreator est.

Path to target

Entry: 3122.81Auto
Out-year EPS: +18% vs consensusCreator est.
Exit multiple: 22x, in line with the last cycle peakCreator est.
= Target: 3484.73Creator est.

The driver is revenue mix. Fee income does not reprice with the curve, so a rising fee share mechanically lowers the earnings beta to rates, which should compress the discount rate applied to the whole franchise. Segment reporting carries it. Fee-based revenue grew through a quarter in which net interest income fell, and the growth was spread across three separate fee lines rather than concentrated in one. The position: long on Bank Hapoalim, entry locked at publication and the exit dated rather than open-ended. The target is stated in the call block above and the horizon with it. Sized to the catalyst rather than to conviction, with the invalidation written into the kill-switch card instead of left implicit. The main risk is that fee income proves more cyclical than it looks. Several of these lines are correlated with market levels, which is not the diversification the argument claims.

Discussion · 5

Pauline VidalAUG 21

This is the clearest write-up I have seen on the name. The installed base argument is stronger than the cycle argument here. Would you underwrite this without the catalyst date?

Gabriel SternAuthorAUG 21

Fair challenge. Invalidation is a close below the lock price on volume, and I should have written that into the card rather than leaving it implicit. (667)

Omri ShakedAUG 21

Respectfully, I think this overstates it. The margin bridge is doing more work here than is acknowledged. What would you need to see to add rather than hold?

Marco BianchiAUG 21

I came in sceptical. The channel data is what makes this hard to dismiss. Interested in what the kill switch looks like in practice.

Omri ShakedAUG 21

Useful framing. The capital intensity point is the one I keep coming back to. Curious whether you would still size it the same at a higher entry.

Evidence · 5 cards

Bank Hapoalim: the non-spread businesses have compounded through the cycle

Discussion · 5

Price attestation