Mizrahi-Tefahot Boosts Quarterly Net Profit 17%

Bank attributes gains to higher interest income and reduced credit-losses expenses.

Mizrahi-Tefahot Bank, Israel's fourth-largest lender, said Wednesday it boosted its net profit in the second quarter by 17% from a year ago to NIS 295 million. The bank attributed the gains to higher interest income and reduced credit-losses expenses.

The bank beat the NIS 265 million forecast by analysts in a Reuters poll as its shares on the Tel Aviv Stock Exchange rose 1.8% to NIS 30.77. Return on equity in the quarter rose to 15.4%, up from 15.2% a year earlier.

"The bank is on track to achieve the target return on equity of the current strategic plan - 15% - even prior to the end of this plan term, which is why the bank launched its new strategic plan ahead of schedule. Over the next five years, the bank intends to maintain rapid growth," CEO Eli Yones said.

Mizrahi-Tefahot said its second-quarter interest income of NIS 837 million grew 17.4% from a year ago. Its credit-loss expenses dropped by 44%. Against that, its income from fees was down 5.8% to NIS 322 million while expenses rose 3.2% to NIS 676 million.

Like other banks Mizrahi-Tefahot faces the challenge of a slowing economy, which will likely hurt loan growth and the extent of troubled loans. But as the country's biggest mortgage lender, it will feel the brunt of efforts by the Bank of Israel and the treasury to cool what they perceive as an overheating housing market. New mortgages rose to a record NIS 4.9 billion in July amid a resurgence of home price rises.

Last month, Mizrahi-Tefahot said it was aiming to reach a core tier I capital ratio to risk-weighted assets - a measure of a bank's financial strength - of at least 9% by 2014, a year ahead of a deadline set by the Bank of Israel. In the second quarter the bank was on its way to its goal, with the ratio reaching just over 8% from 7.77% at the end of 2011, even though its overall capital adequacy ratio slipped to 12.9% from 13.6% in the period.