Israel's Bank Leumi Profit Jumps 87%, Boosted by Sale of Visa Europe Stake

Discount Bank and First International also post gains from same sale in the second quarter.

Bank Leumi in Tel Aviv.
Bloomberg

REUTERS - Bank Leumi, Israel Discount Bank and First International Bank of Israel all reported higher second-quarter profits thanks to gains from the sale of shares they held in Visa Europe.

Leumi, Israel’s second-largest lender, said quarterly net profit jumped 87% to 970 million shekels ($255 million), up from 518 million a year ago and above a forecast of 655.6 million shekels in a Reuters poll of analysts. Profit was boosted by a 242 million shekel gain from the sale of Visa Europe shares amid its acquisition by Visa Incorporated.

Leumi’s net interest income edged up 1.7% from a year ago to 2.03 billion shekels in the April-June quarter. It recovered 154 million shekels from loans previously written off, compared with credit loss expenses of 12 million a year ago. Analysts had forecast on average credit loss expenses of 83 million shekels.

Excluding the one-time gain and the beat in the loan loss provision, “we estimate that underlying return on equity stood at 7%, which is in line with our estimates,” Barclays analyst Tavy Rosner said, adding that Leumi was his top pick among Israeli banks to outpace its peers, with its shares up 5.7% since the beginning of 2016.

Leumi shares were down 0.85% at 14.08 shekels late Sunday afternoon on the Tel Aviv Stock Exchange.

“We believe the bank has achieved a strong capital position and going forward will be able to focus solely on execution,” Rosner said.

Leumi’s Tier 1 ratio, which measures equity capital as a proportion of total risk-weighted assets, rose to 10.4% at the end of June from 9.52% a year earlier.

Leumi’s board approved a cost-cutting program in June, under which 673 employees out of about 9,350 in Israel have agreed to take early retirement by the end of 2016.

Discount Bank, meanwhile, reported a 46% rise in quarterly net to 393 million shekels in the second quarter, up from 270 million a year earlier and above a forecast of 314 million shekels in a Reuters poll of analysts.

Excluding the sale of Visa shares and other one-off items, profit at Israel’s third-largest bank in terms of assets was 11% lower at 241 million shekels.

Discount shares were down 0.9% to 6.84 shekels in late afternoon trading.

Credit loss expenses in the quarter were 58 million shekel, versus income of 28 million a year ago. Net interest income increased 5.5% to 1.16 billion shekels.

Discount’s core Tier 1 capital adequacy ratio, which measures equity capital as a percentage of total risk-weighted assets, held steady in Basel III terms at 9.5%.

First International Bank of Israel reported a 14% rise in second-quarter profit to 134 million shekels, up from 118 million a year earlier. However, unlike Leumi and Discount, it came up short of analysts’ forecasts to earn 188.5 million shekels, according to a Reuters poll.

FIBI’s gain related to the Visa share sale was 57 million shekels in the second quarter. It provisioned 25 million shekels for the future discontinuation of operations as part of efficiency measures. FIBI’s Tier 1 capital ratio rose to 9.97% from 9.69% a year ago.

FIBI shares were down 1.4% at 49.56 shekels.