Banking Fees Rise in 2022 Due to Increased Foreign Currency Transactions and Economic Recovery

The cost of managing current accounts and holding credit cards saw a noticeable uptick in 2022, with the average expense per current account reaching NIS 26.9 per month, marking a NIS 2.3 per month surge from the previous year. This data comes from a recent periodic report that scrutinized the fees incurred by households and small businesses, issued under the oversight of the local banks.

While the report underscores that this cost remains unchanged from 2019, the primary reason for the 2022 increase can be attributed to a surge in foreign currency transactions facilitated by credit cards. This surge is seen as a direct consequence of societies returning to a sense of normalcy after the impact of the global pandemic.

The report delves into the banks' fee-generated revenues from households and small businesses, revealing a rise from 5.81 billion shekels to 6 billion shekels in 2022. The bulk of this income, constituting 26%, originates from trading commissions within the banks, amounting to a substantial NIS 1.5 billion. This figure, however, marks a reduction from the 31% share observed in 2021, which the report attributes mainly to a decrease in earnings from commissions linked to trading foreign securities. This reduction is attributed to a decrease in public engagement in this particular activity during that year.

Credit cards contribute significantly to the banks' income, accounting for 21% or NIS 1.3 billion of the total revenue. These fees encompass not only the charges associated with the credit cards but also encompass currency conversion fees imposed by the banks and credit card companies for transactions conducted in foreign currencies.

Households and small businesses together contributed 20% of the fee income, equivalent to NIS 1.2 billion, for managing their current accounts.

A noteworthy statistic shows that roughly 15% of the total fee-generated income, around NIS 900 million, emanates from credit-related fees. This represents a minor decrease from the 16% share in the previous year, primarily attributed to a reduction in the "mortgage portfolio opening fee" following regulatory intervention that capped the fee at NIS 360.

Another crucial component of the banks' fee income, constituting approximately 11% or NIS 660 million, arises from the differential fee applied to foreign currency exchange. This fee comes into play when converting foreign currency directly to a bank account, rather than using a credit card. This marks a rise from the 10% share observed in 2021.

Particularly interesting is the segmentation of securities trading commissions, which constitutes the most substantial revenue source concerning other types of commissions. The data reveals that 42% of the revenue generated from securities trading stems from fees associated with securities deposit management for domestic trades. This includes custody fees that banks charge as a percentage of the portfolio value. On the other hand, custody fees for foreign-traded securities only accounted for 10% of the total revenues. The costs of buying and selling securities in both domestic and foreign markets represented 22% and 21% of the revenue, respectively.

Overall, the report underscores the dynamic interplay of various factors influencing fee income for banks in the context of an evolving economic landscape.