The largest credit card company in Israel, Isracard has decided to cut costs and streamline operations, due to which it is laying off 12% of its workforce, or 250 employees.
On Tuesday, the board of directors of Isracard gave their approval for the efficiency plan that the company had devised.
In accordance with this plan, the company will cut about 250 jobs by the end of next year. The announcement was made on Wednesday via a filing submitted to the TASE (Tel Aviv Stock Exchange).
The reduction in the headcount is due to streamlining procedures, changes in organizational structure and downsizing of units.
As far as the compensation that will be paid out to the laid-off employees are concerned, Isracard believes that it will be a one-time expense that will cost the company around NIS 30 million to NIS 35 million.
This will be included in the financial results of the company for 2022. It is estimated that the efficiency plan’s implementation will save the company about NIS 55 million to NIS 65 million.
There was a more than 2% increase in Isracard shares in intraday trading after the announcement.
The efficiency plan
Ran Oz, the chief executive of Isracard, said that the company needs to be more efficient, focused and flexible because they operate in a competitive market.
The CEO said that the developments and strategy of the group would help it in becoming more competitive, but this involves having to reduce its number of employees.
According to Isracard, they were implementing the efficiency plan while cooperating with the workers union.
It also said that they were negotiating a variety of assistance programs and solutions for employees who were being laid off.
Isracard said that they could already see the results of their strategic plan, as the credit portfolios for the business sector and private customers had already seen double-digit growth. Plus, different operating expenses had declined.
The right direction
The reduction in staff come less than a month after the company had reported its third quarter financial results, which showed a profit of NIS 60 million, a decline of 40% from the same quarter in the previous year.
Market experts said that the company had taken a step in the right direction. They said that as compared to the banking sector, the credit card companies have not kept up with digital transformation.
Therefore, they have not been as quick in reducing their operational expenses that can help them become more efficient.
However, they also added that Isracard still have to do a lot in order to improve its efficiency ratio. In 2019, regulation in Israel saw Bank Hapoalim separate itself from Isracard.
This move was made partly for boosting competition in the market by divesting banks from credit card companies.
Hapoalim had sold its stake in the business, which was around 65.2%, after which the shares of the credit card company had begun trading on the Tel Aviv Stock Exchange (TASE).