Mortgage Provision Dents Mizrahi-Tefahot Profit

Tougher loan regulations hit profits of Israel's fourth largest bank, which holds a 37 percent share of the mortgage market.

Mizrahi-Tefahot Bank , Israel's fourth largest bank and biggest mortgage lender, reported a bigger than expected drop in second quarter net profit after making a provision against housing loans to comply with tougher regulations.

The bank, whose share of the mortgage market is more than 37 percent, said it would resume dividend payouts as it was on track to meet capital adequacy directives on time.

Mizrahi-Tefahot, the first of Israel's top banks to report quarterly earnings, said it made NIS 245 million ($69 million) in the second quarter, down from NIS 295 million a year earlier and 5 million below a Reuters poll average forecast. Financing income rose 8.5 percent to NIS 921 million.

Including the mortgage provision of NIS 191 million, total charges against credit losses were NIS 181 million compared with NIS 45 million in the second quarter of 2012.

"If not for this extraordinary provision, the bank would have posted ... a record profit in excess of NIS 300 million," said outgoing chief executive Eli Yones.

The bank said that it would pay a quarterly dividend of NIS 75 million, or 0.328 shekel a share, for its first payout in two years, and aims to pay dividends until the end of 2014 of up to 30 percent of annual net income from regular operations.

Its Tier I capital, a measure of a bank's financial strength, rose to 8.81 percent from 8.03 percent a year earlier. Including the dividend, the ratio was 8.74 percent.

Israel's banks must reach a Tier I capital ratio of 9 percent by the start of 2015.

Eldad Fresher, Mizrahi-Tefahot's chief financial officer, will take over as CEO at the end of August. Yones has been CEO for the past 9-1/2 years.

Israel's top three banks report quarterly results this month.

Gabriel Bahaliya
Eliyahu Herkowitz