Three of Top Five Israeli Banks Post Higher Q2 Profits

But most gain was from one-time items that depressed year-ago earnings.

Tomer Appelbaum

Three of Israel’s biggest banks on Wednesday reported sharply higher earnings in the second quarter, although one-time factors were mostly responsible for the improvement.

Bank Hapoalim, Israel’s largest lender, said it earned 886 million shekels ($229 million) in the three months, up from 782 million shekels a year earlier and above expectations of 766 million shekels in a Reuters poll of analysts.

Hapoalim said it earned 886 million shekels in the second quarter, up from 782 million shekels a year earlier and above expectations of 766 million shekels in a Reuters poll of analysts. Nevertheless, shares ended down 1% on Wednesday, at 21.49 shekels.

Net financing profit rose to 2.47 billion shekels from 2.32 billion shekels, while its provision for credit losses totaled 213 million shekels, compared to income of 3 million shekels in the same quarter last year. Operating and other expenses fell to 2.11 billion shekels, from 2.25 billion shekels.

Hapoalim’s core Tier 1 capital ratio to risk-weighted assets was 9.4% according to Basel III, up from 9.3% at the end of 2014. The board approved a dividend of 177 million shekels, equal to 20% of net profit.

No. 2 Bank Leumi more than doubled second-quarter profit but the increase was because its year-earlier earnings were hurt by a large provision to cover a U.S. tax investigation.

Leumi said it earned 518 million shekels, up from 229 million shekels a year ago but below a forecast of 552 million shekels in a Reuters poll of analysts. Shares dropped 2.9% to close at 15.82 shekels.

Net interest income rose 5% to 2 billion shekels, although noninterest income fell 22%. It had expenses in respect of credit losses of 12 million shekels versus recoveries of 16 million shekels a year ago. Overall expenses fell 17% to 2.16 billion shekels.

Leumi’s Tier 1 ratio rose to 9.52% at the end of June versus 9.11% a year earlier.

In the second quarter of 2014, Leumi set aside 460 million shekels for an eventual settlement with U.S. authorities over tax violations. Profit was 765 million shekels without the provision.

Israel Discount Bank reported a 68% rise in quarterly profit to beat estimates, boosted by an early retirement program that sharply lowered salary expenses.

Israel’s No. 3 bank earned 270 million shekels in the quarter, up from 161 million shekels a year earlier and well above a forecast of 226 million shekels in a Reuters poll of analysts. Discount shares rose 1% to end at 7.82 shekels.

Discount’s profit in the 2014 quarter was weighed down by provisions for a retirement plan, without which its net profit would have amounted to 352 million shekels.

Salary and other expenses fell 25.4% while overall expenses were down 14.6%.Discount’s credit loss recoveries were 28 million shekels, down 20% from a year ago. Net interest income dipped 0.5% to 1.095 billion shekels.

Its core Tier 1 capital adequacy ratio rose to 9.5% from 9.4% at the end of 2014.

No. 5 First International Bank of Israel reported a 21% drop in quarterly profit due to a one-off provision for severance pay. Net profit was 118 million shekels, compared to 150 million shekels a year earlier, but excluding one-time items, it rose 4.4% in the quarter.

Analysts in a Reuters poll on average forecast a profit of 119 million shekels. FIBI shares dropped 1.2% Wednesday to close at 55 shekels.

Its core Tier 1 ratio edged up to 9.71% from 9.52% at the end of the first quarter.