Bank Hapoalim Net Profits Up 19.5%, Sets Asia Expansion

Israel's largest lender reports higher-than-expected rise in quarterly net profit, boosted by an increase in financing income and a gain in its provision for credit losses.

David Bachar

Bank Hapoalim, Israel’s largest lender, turned in a 19.5% increase in second-quarter profit and said it was expanding its operations in Asia by opening an office in Shanghai.

Hapoalim on Thursday said it earned 783 million shekels ($225 million) in the second quarter, up from 655 million shekels a year earlier, boosted by an increase in financing income and a gain in its provision for credit losses.

Profit was also above an average forecast of 705 million shekels among analysts polled by Reuters before the earnings release. Shares of Hapoalim rose 0.6% to 20.52 shekels in late Tel Aviv Stock Exchange trading.

Net financing income rose to 2.32 billion shekels from 2.18 billion shekels, while it had income in its provision for credit losses of 3 million shekels, compared with an expense of 301 million shekels in the second quarter of 2013. Return on equity reached 10.8%, compared with 9.9% in the same quarter last year. Hapoalim’s core Tier 1 capital ratio to risk-weighted assets was 9.53%, according to the international Basel III rules, compared to 9.15% on January 1.

The bank’s board approved a dividend of 119 million shekels for the second quarter, up from 106 million shekels in the first quarter. Hapoalim is still waiting approval from banking regulators to increase its dividend to 30% of net profits but in the meantime is paying up to 15%.

Executives said Hapoalim’s decision to open an office in Shanghai, Chinese’s leading business center, was strategically important, citing forecasts that half the increase in the world’s wealth through 2018 will be generated by the Asia-Pacific region. In addition, Israeli exports to China have grown sharply in recent years and are expected to continue to do so.

It follows a similar move by Bank Leumi three months ago, as Israel pursues closer trade and business ties with China.

Hapoaliim has an office in Hong Kong and in recent years has been conducting more business with Israeli companies active in China. The bank has a framework agreement with several major Chinese lenders that enable it to provide faster more efficient banking services for exporters.

In addition, its Poalim Direct unit, formed in 2001, provides consulting services for Israeli businesses operating in China and Chinese companies seeking to enter the Israeli market or to invest in Israel.