Discount Bank Profit Plunges While FIBI Reports a Rise

Lower earnings at Discount due in part to drop in value of its FIBI stake.

Israel Discount Bank on Wednesday reported a 57% drop in profit in the final quarter of 2013, due in part to a drop in the value of its stake in First International Bank of Israel.

But FIBI reported a 6.8% rise in fourth-quarter profit, to 141 million shekels ($40.7 million), compared with 132 million shekels a year earlier, as charges for credit losses fell and income from commissions grew.

Discount, Israel’s third-largest lender, said Wednesday it earned 72 million shekels in the fourth quarter, compared with 169 million a year earlier. Excluding a 158 million shekel provision for a decline in the value of its 26.5% stake in FIBI, Discount posted a profit of 230 million shekels in the fourth quarter.

Discount’s fourth-quarter profit beat analysts’ expectations of 66 million shekels, according to a Reuters poll. Discount shares were up 0.8%, at 6.50 shekels in late trading on the Tel Aviv Stock Exchange on Wednesday.

Net interest income edged up 0.5%, to 1.07 billion shekels, while credit loss expenses fell by more than half, to 123 million shekels.

Lilach Asher-Topilsky, who took over as Discount’s CEO this month, said the bank plans to present a revised business plan in August. Discount said it plans to trim its stake in FIBI, Israel’s fifth-largest bank.

“For now, I would only mention that we will continue the bank’s focus on further retail growth and further efficiency measures,” she said. “It is clear to us and to the market that the cost side is the key factor that encumbers the bank’s performance.”

Discount’s core Tier 1 capital to risk-weighted assets rose to 9.3% at the end of 2013, from 8.6% at the end of 2012. It was 8.9% based on Basel III directives.

The bank, whose net profit fell 6.7%, to NIS 252 million, said it aims for a core capital adequacy ratio of 9.3%-9.4% by the end of this year.

Israel’s banking regulator has mandated banks to maintain a core Tier I ratio of at least 9% by the start of next year, as part of a global drive to strengthen the industry and prevent a repeat of the 2008 financial crisis.

Israeli banks have so far posted a mixed quarter.

Last week Mizrahi-Tefahot, the country’s fourth-largest bank, said its fourth-quarter net fell 6.7%, to NIS 252 million. Bank Hapolaim and Bank Leumi,  Israel’s top two banks, will report their results by the end of March.

At FIBI, net interest income and non-interest financing income edged up 1 million shekels, to 594 million shekels, while provisions for credit losses dropped to 32 million shekels, from 49 million.

FIBI’s Tier 1 capital ratio increased to 10.04%, from 9.65% at the end of 2012.

FIBI shares were down 0.1%, at 57.48 shekels in late trading in Tel Aviv.

Ofer Vaknin