Three Israeli Banks Report Higher 1st Quarter Earnings

Bank Hapoalim, Israel Discount Bank and First International Bank beat analysts’ forecasts.

Tomer Appelbaum

Three of the country’s banks, including its largest lender, Bank Hapoalim, reported their first quarterly earnings on Wednesday and all showed stronger profits.

Hapoalim reported higher quarterly net profit due to an increase in financing profit and income from fees as well as lower expenses. Hapoalim has been shifting its focus away from large corporate clients and toward retail, small businesses and middle-market clients, which together account for 68% of the bank’s loan portfolio. It posted a first-quarter net profit of 808 million shekels ($209 million), compared to 726 million shekels a year earlier and above expectations of 731 million shekels in a Reuters poll of analysts. Despite deflation and very low interest rates — the central bank’s key rate is at 0.1% — Hapoalim increased its net financing income due to a rise in its loan book in these three more profitable areas.

For its part, Israel Discount Bank reported a higher-than-expected, 85% jump in quarterly profit, as credit loss provisions fell. Discount, Israel’s third-largest bank, said on Wednesday it earned 242 million shekels in the first quarter, up from 131 million shekels a year earlier and above a forecast in a Reuters poll of 219 million shekels.

First International Bank of Israel, the country’s fifth-largest bank, reported on Wednesday a 5% rise in first-quarter net profit due to higher commission income and lower salary expenses. FIBI posted a quarterly net profit of 125 million shekels compared to 119 million shekels a year earlier and 124 million shekels forecast in a Reuters poll of analysts.

Hapoalim’s net financing income rose to 2.17 billion shekels from 2.06 billion shekels, while its provision for credit losses was 60 million shekels versus a recovery of 15 million shekels a year earlier. Operating and other expenses slipped to 2.188 billion shekels from 2.199 billion as the bank had lower salary expenses due to a reduction in staffing. The bank in March said it would eliminate up to 700 positions in 2015-2016, after cutting more than 500 jobs in the past two years.

Shares in Hapoalim, which have gained 22% since February, closed up 0.3% on Wednesday after rising 1.2% to a new high for the year of 20.45 shekels at midday. “Hapoalim delivered a good set of results despite the low base rate and the deflation,” said Barclays analyst Tavy Rosner, who rates the shares “underweight.”

The bank’s board approved a dividend of 162 million shekels for the quarter, representing 20% of net profit, the highest payout rate in Israel’s banking sector. The bank in April said it would raise its dividend from 15%.

Discount’s income from interest income was up 0.2% at 1.02 billion shekels, while credit loss expenses slid 57% to 32 million shekels. The bank said it was examining closing its Swiss operation but did not elaborate.

FIBI’s net interest and noninterest financing income fell 10% to 519 million shekels due to the reduction in interest rates and the fall in the consumer price index. The bank increased its expenses on credit losses to 12 million shekels from 10 million shekels. The first quarter reflects “continued growth at the group, which is apparent from expansion in credit to the public in the household segment, in private banking, in the commercial segment and in mortgage activity,” said FIBI CEO Smadar Barber-Tsadik.