Bank of America has formally started covering the Israeli banking sector, issuing "buy" ratings for the nation's four largest financial institutions based on their leverage and potential to thrive on economic currents following the war in Gaza.
In his analysis, Bank of America analyst David Taranto set a price objective of 89.5 shekels for Hapoalim, which stands as one of the two dominant banks in the market, implying an 18% increase from present trading levels, according to Reuters. The agency reported that rival institution Leumi was given a target of 85.0 shekels, suggesting a 16% growth trajectory.
Reuters further detailed that Mizrahi-Tefahot received a valuation target of 265.0 shekels, while Israel Discount Bank was pegged at 40.3 shekels.
"Buy them all," Taranto wrote in a report obtained by Reuters.
The analyst noted that domestic lenders had existed in a void for years following the transition of the Tel Aviv Stock Exchange from an emerging market to developed status. According to Reuters, this shift excluded them from emerging indexes while leaving them barely visible in global benchmarks.
"This disconnect kept them under the radar for many international investors," Taranto said, per the Reuters report. "After a strong rally, we see them shifting from overlooked to favored as fundamentals point to further gains."
He referenced factors such as excess capital, operational efficiencies, attractive valuations, and robust balance sheets – along with substantial dividend distributions – as key drivers.
The banks are also expected to navigate challenges including reduced interest rates, softer inflation, additional government-imposed levies, real estate risks, and geopolitical instability, Reuters added.
On Wednesday, the main banking index in Israel advanced by 0.7%. The sector has recorded a 6% gain in early 2026 following a massive 61% ascent in 2025, Reuters concluded.
