Foreign investors bet on the banking sector: what they bought this week

Sometimes one ranking reveals an entire market trend. This week, three of the five largest purchases by foreign investors on the Tel Aviv Stock Exchange were bank stocks. This should not come as a surprise: the second-quarter bank reporting season has been one of the strongest seen in a long time.

A brief reminder: "net purchases" are not the total transaction volume, but the difference between what was bought and what was sold, serving as an indicator of foreign optimism regarding a specific asset.

At the top of the ranking is Bank Hapoalim with 79.25 million shekels, marking its third consecutive week at the top of foreign purchases. It is followed by Bank Leumi with 72.14 million shekels, and in fourth place is Discount with 48.5 million shekels. Together, these three banks concentrated about 200 million shekels in net purchases.

The reason lies in the strong financial reports:

• Leumi recorded a record net profit of 2.832 billion shekels for the quarter, with an impressive return on equity of 16.3% and a capital distribution of about 1.4 billion shekels to shareholders.

• Hapoalim earned about 2.5 billion shekels.

• Discount reported 1.2 billion shekels in profit, alongside a sharp efficiency program and the consideration of merging Mercantile into its operations.

The five largest banks combined garnered a total profit of 8.534 billion shekels for the quarter, with almost all distributing generous dividends. Although the Bank of Israel is in the middle of an interest rate cut cycle—which traditionally pressures banking margins—foreign investors are looking at the big picture: return on equity of 14% to 16% and stock prices that were trading at a discount after lagging behind the leading index.

Beyond the banks, Teva continues to attract foreign capital with 64.33 million shekels, confirming the gradual recovery of the pharmaceutical giant. Enlight Energy rounds out the top five with 35.7 million shekels, returning to the list thanks to a 55% revenue increase and progress in giant projects in the USA, including infrastructure for the artificial intelligence era.

Bank stocks are among the heaviest weights in Tel Aviv indices and are present in almost every pension fund or provident fund. Consequently, part of the huge dividends distributed by banks flows quietly into your long-term savings. However, the market is already pricing in the fact that further interest rate cuts will weigh on margins, so investors should remain cautious.