Bank stock ranking in July: This is the stock that jumped by more than 15%
After a difficult June, the bank index recovered strongly, and the two banks that suffered the biggest blow last month led the jumps. But in the background, a fundamental question hovers: how did two consecutive interest rate cuts, which are supposed to erode bank profits, not stop the celebration? And could the security tension change the picture?
The month of July brought a smile back to investors on the stock exchange, and bank stocks were among the leaders of the recovery. The bank index jumped by 9.62%, a move that completely erased the decline of June (6.33%) and even left investors with a profit. After a month considered one of the worst since October 2023, the entire market breathed a sigh of relief, and the banking sector, one of the heaviest and most influential on the stock exchange, led the trend.
The most interesting detail lies in the identity of the winners. It was precisely the two banks that suffered the sharpest drop in June that became the stars this month. Mizrahi Tefahot, which fell about 9% last month, jumped by 15.58% and led the ranking.
Following it was the First International Bank, which lost more than 12% in June, and climbed 12.09%. The rest of the trio recorded similar and impressive gains: Leumi (8.81%), Hapoalim (8.37%), and Discount (8.34%).
Parallel to the rally, on July 6, the Bank of Israel lowered the interest rate for the second consecutive time to a level of 3.5%, following a previous cut at the end of May. Technically, this is less good news for the banks.
Their huge profits rely to a large extent on the "interest margin," the gap between the interest they charge on loans and the low interest they pay on deposits. When the interest rate falls, this margin narrows, and the main profit engine loses its strength.
So why did the stocks rise? Because the market looks at the big picture. The interest rate cuts come along with an improvement in the economy: the Bank of Israel raised the growth forecast for 2026 to 4%. A stronger economic environment means more demand for credit, fewer borrower defaults, and more active activity in the capital market; all these support bank profits and offset part of the damage to the margin. In short, investors preferred the recovery story over the fear of margin erosion.
The Bank of Israel expects two more interest rate cuts in the coming year, to a level of about 3% by mid-2027. But this entire scenario relies on one central assumption: that a round of fighting against Iran will not resume. And that is where the risk lies.
If the security tension flares up again, it could spike energy prices, put pressure on the shekel, and bring back inflationary pressures, which would make it difficult for the Bank of Israel to continue lowering the interest rate.
Ironically, such a scenario would actually keep bank margins high, but at the heavy price of uncertainty in the rest of the market.
For your pocket, this month has a double meaning. Bank stocks are among the central holdings in pension funds and provident funds, so the recovery in July brought color back to long-term savings. At the same time, the interest rate cut is news for you as borrowers: the prime rate has dropped to 5%, and the monthly payment on mortgages on this track is expected to decrease. What burdens the banks' margins eases the burden on those who pay them interest every month.
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