Despite Hard Times, Credit Card Firms Charging Ahead

The credit card companies owned by Israel's big banks have often been called the "financial high-tech sector," recording double-digit growth in transaction turnover and impressive additions to their bottom line.

Unlike high-tech companies, however, which were among the first to be hit by the global financial crisis, the credit card companies began feeling the effects of the recession only in the fourth quarter of 2008, and even then the downturn was slight.

Two of Israel's three big credit card companies netted less in the fourth quarter of 2008 than in the parallel quarter of 2007. Isracard's profits were down by 3%, to NIS 34 million, while Leumi Card's bottom line shrank by 25%, to NIS 22 million. The companies' revenues were actually higher, but only by single-digit percentages. Isracard's revenues grew by 4%, to 305 million, while Leumi Card's were up 6%, to NIS 199 million.

Visa Cal, on the other hand, continued to rake in profits, raising its bottom line by a whopping 80% over the parallel quarter in 2007, to NIS 110 million, on 25% more in revenues, at NIS 349 million.

Visa Cal, managed by Boaz Checkik, was the last of the three companies to release its financial report Monday, and attributed its good fortune to several factors. The first is a one-off profit of NIS 64 million from the sale of Visa International shares. Even without that sum, Visa Cal's profits were NIS 46 million, which is still 21% more than in the fourth quarter of 2007.

Most of this increase comes from profits from the company's clearing operations at Web sites abroad, particularly high risk ones, such as pornography, gambling and sites that sell drugs like Viagra. Visa Cal is the only Israeli credit card company in those fields, and has profited handsomely from them. The operations of Cal Properties, which handles the overseas clearing activities, contributed NIS 25 million, or 23%, to Visa Cal's net profits.

Visa Cal also leads the other two credit card companies in an annual roundup, with net profits of NIS 279 million. Isracard and Leumi Card netted NIS 173 million and NIS 146 million respectively.

Visa Cal had 1.24 million active credit cards (with at least one transaction per quarter) in circulation at the end of 2008, up 4% over 2007, but still fewer than the other two companies. Isracard has the most, with 2.17 million - 3% more than in 2007, while Leumi Card has 1.379 million, an increase of 9%.

The three companies cleared a combined total of NIS 151 billion in transactions in 2008, with Leumi Card recording the greatest increase - 37% - compared to 2007. Isracard and Visa Cal cleared 9% and 6% more transactions in monetary terms, respectively.

Another interesting figure is the salary for their CEOs. Boaz Chechik cost Visa Cal NIS 3.55 million in 2008, while outgoing Isracard CEO Haim Krupsky (recently replaced by Dov Kotler) cost his company NIS 1.4 million.