Bank Hapoalim Announces First Quarter 2018 Financial

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News Desk 2018

May 24, 2018 at 5:15 AM 22

Bank Hapoalim Announces First Quarter 2018 Financial Results

- Return on Equity of 7.2% , Net Profit totaled NIS 628 million -

- Net Profit, excluding provisions in respect of US Investigation, totaled NIS 688 million and Return on Equity would have been 7.9% -

- The Bank's credit portfolio grew by 2 % -

- Dividend payment in respect of first quarter profits totaled NIS 251 million -

TEL AVIV, Israel, May 24, 2018 (GLOBE NEWSWIRE) -- Bank Hapoalim (TASE: POLI ) (ADR:BKHYY), Israel's leading financial group, today announced its financial results for the first quarter ended March 31, 2018.

Key highlights:

Net Profit - totaled NIS 628 million, compared with a net profit of NIS 767 million in the corresponding quarter of 2017. Excluding provision in connection with the investigation of the Bank Group’s business with American clients in the amount of NIS 60 million, net profit in the first quarter totaled NIS 688 million.
Return on Equity - reached 7.2%, compared with 9.2% in the corresponding quarter of 2017. Excluding the provision in connection with the investigation of the Bank Group’s business with American clients, Return on Equity in the first quarter of 2018 stood at 7.9%.
Total income from regular financing activity totaled NIS 2,289 million, compared with NIS 2,121 million in the corresponding quarter of 2017, an increase of 7.9%.
Credit growth: total credit portfolio grew by 2.0% in the first quarter of 2018.
Improvement in asset quality: NPL ratio (impaired credit to the public not accruing interest income) as a percentage of total credit stood at only 0.70%. The Bank manages a diversified credit portfolio with a high diversification of credit segments (individuals, mortgages, small businesses, commercial and corporate).
Retail Deposit base in Israel increased by 1.7%.
Tier 1 capital ratio: The Bank exceeded the capital adequacy targets required by the Bank of Israel and the Bank's Capital Plan. Tier 1 Capital Ratio stood at 11.05% as at March 31, 2018.
Dividend payments: Total dividend payment in respect of first quarter profits totaled NIS 251 million, representing a 40% payout ratio.

Key developments in the financial statements for the first quarter of 2018:

Profit from regular financing activity totaled NIS 2,289 million in the first quarter of 2018 compared with NIS 2,121 million in in the same period last year, an increase of 7.9%. The increase is mainly attributed to the growth in the Bank's business activity as part of its strategic framework.
Fees and other income in Israel – totaled NIS 1,276 million in the first quarter of 2018 compared with NIS 1,282 million in the same period last year.
Net provision for credit losses totaled NIS 250 million in the first quarter of 2018, 0.35% of the average credit to the public, compared with NIS 107 million, 0.16% of the average credit to the public, in the same period last year. The increase is related to the significant increase in the collective provision, mainly as a result of increase in balances of corporate credit in the quarter.
Gross provision for credit losses , before recoveries, stood at 0.71% in the first quarter of 2018, compared with 0.52% in the same period last year.
Operating and other expenses , totaled NIS 2,353 million in the first quarter of 2018, compared with NIS 2,217 million in same period last year.
Social responsibility - The Bank continues to lead in contribution to the community in the form of financial donations, especially in the field of education, culture and welfare, which totaled NIS 13 million the first quarter of 2018.

Key developments in Balance Sheet items for the first quarter of 2018:

Consolidated balance sheet as at March 31, 2018 totaled NIS 448.2 billion, compared with NIS 454.4 billion at the end of 2017, a decrease of 1.4%.
Net Credit to the public totaled NIS 284.1 billion, compared with NIS 278.7 billion at the end of 2017, an increase of 2.0%, caused mainly by the increase in corporate lending, commercial customers and housing loans.
Consumer credit in Israel totaled NIS 40.0 billion compared with NIS 40.3 billion at the end of 2017, a decrease of 0.7%.
Housing loans in Israel totaled NIS 75.6 billion compared with NIS 74.1 billion at the end of 2017, an increase of 2.0%.
Credit to small businesses in Israel totaled NIS 30.9 billion compared with NIS 31.2 billion at the end of 2017, a decrease of 1.0%.
Credit to the commercial segment in Israel totaled NIS 34.8 billion compared with NIS 33.9 billion at the end of 2017, an increase of 2.9%.
Credit to the corporate segment in Israel totaled NIS 68.6 billion compared with NIS 65.5 billion at the end of 2017, an increase of 4.8%.
Deposits from the public totaled NIS 344.8 billion compared with NIS 347.4 billion at the end of 2017, a decrease of 0.7%.
Retail Deposits in Israel totaled NIS 174.5 billion compared with NIS 171.5 billion at the end of 2017, an increase of 1.7%.
Small businesses Deposits in Israel totaled NIS 38.8 billion compared with NIS 38.2 billion at the end of 2017, an increase of 1.6%.
Shareholders' equity totaled NIS 36.1 billion as at March 31, 2018, compared with NIS 35.9 billion at the end of 2017, an increase of 0.6%.
Total capital ratio stood at 14.06% as at March 31, 2018, compared with 14.64% as at December 31, 2017.
Leverage ratio representing the ratio of the capital measurement (Tier 1 capital) to the exposure measurement (total balance sheet exposures, derivatives exposures and securities financing transactions, and off-balance sheet items), stood at 7.38% at the end of the first quarter of 2018.
Liquidity coverage ratio representing the ratio between the supply of "high-quality liquid assets” to the net expected outgoing cash flow in a stress scenario, stood at 119% at the end of the first quarter of 2018.

Conference Call Information

Bank Hapoalim will host a conference call today at 4:00 p.m. Israel Time/ 09:00 a.m. Eastern Time to discuss the results. The call will be accompanied by a slide presentation.

In order to participate, please dial the following numbers (at least ten minutes ahead of the scheduled start time): United States 1-888-281-1167; United Kingdom 0-800-051-8913; International (972) 3-9180685. No password is required.

The slide presentation, earnings release and the first quarter 2018 financial statements will be available on the Bank's website, www.bankhapoalim.com , under Investor Relations - Financial Information.

Following the conclusion of the call, a replay of the call will be available by audio playback on Bank Hapoalim's website. The replay can be accessed until May 31, 2018 by calling (972) 3-9255918 (international).

Please note: The conference call does not replace the need to peruse the immediate reports and the Financial Statements of the Bank, including all the forward-looking information included therein in accordance with Section 32A of the Securities Law, 1968.

Contact: Karen Mazor, SVP Head of Investor Relations Bank Hapoalim T: +972 54 228 8039 E: Karen.mazor@poalim.co.il

Condensed financial information
Condensed financial information and principal performance indicators over time


	For the three months ended										For the year ended
											December 31
	March 31,		December 31,		September 30,		June 30,		March 31,		2017		2016
	2018		2017		2017		2017		2017
Main performance indicators
Return of net profit on equity attributed
to shareholders of the Bank⁽¹⁾	7.16	%	6.96	%	5.31	%	9.51	%	9.22	%	7.50	%	7.72	%
Return of net profit on equity attributed
to shareholders of the Bank excluding
extraordinary items⁽¹⁾⁽²⁾	7.86	%	10.45	%	9.91	%	9.51	%	9.22	%	9.44	%	*10.04	%
Return on average assets⁽¹⁾	0.56	%	0.54	%	0.41	%	0.72	%	0.69	%	0.59	%	0.60	%
Efficiency ratio - cost-income ratio	63.75	%	70.42	%	71.62	%	59.28	%	61.55	%	65.73	%	64.47	%
Efficiency ratio - cost-income ratio
excluding extraordinary items⁽²⁾	62.12	%	62.43	%	60.85	%	59.28	%	61.55	%	61.03	%	60.95	%
Financing margin from regular activity⁽¹⁾⁽³⁾	2.21	%	2.21	%	2.20	%	2.24	%	2.07	%	2.16	%	2.09	%
Liquidity coverage ratio⁽⁴⁾	119	%	122	%	123	%	127	%	128	%	122	%	124	%

	As at										As at December 31
	March 31,		December 31,		September 30,		June 30,		March 31,		2017		2016
	2018		2017		2017		2017		2017
Ratio of common equity Tier 1 capital
to risk components⁽⁵⁾	11.05	%	11.26	%	11.26	%	11.35	%	11.21	%	11.26	%	11.01	%
Ratio of total capital to risk components⁽⁵⁾	14.06	%	14.64	%	14.85	%	14.99	%	14.90	%	14.64	%	15.11	%
Leverage ratio⁽⁵⁾	7.38	%	7.37	%	7.37	%	7.36	%	7.30	%	7.37	%	7.25	%

	For the three months ended										For the year ended December 31
	March 31,		December 31,		September 30,		June 30,		March 31,		2017		2016
	2018		2017		2017		2017		2017
Main credit quality indicators
Allowance for credit losses as a
percentage of credit to the public	1.38	%	1.36	%	1.39	%	1.40	%	1.45	%	1.36	%	1.49	%
Impaired debts and debts in arrears of 90
days or more as a percentage of credit to
the public	1.23	%	1.27	%	1.29	%	1.48	%	1.55	%	1.27	%	1.76	%
Net charge-offs as a percentage of
average credit to the public⁽¹⁾	0.14	%	0.13	%	0.06	%	0.36	%	0.39	%	0.23	%	0.19	%
Provision for credit losses as a percentage
of average credit to the public⁽¹⁾	0.35	%	0.03	%	0.04	%	0.24	%	0.16	%	0.12	%	0.10	%

* Restated for inclusion of the effects of the reduction of corporate tax as part of profit excluding extraordinary items in 2016. In the Periodic Report for 2017 (and the subsequently published presentation for 2017), net profit and return on equity for 2016 and 2017 were presented excluding expenses in respect of the update of the provision in connection with the investigation of the Bank Group's business with American clients and the discontinuation of activity in Switzerland only. In 2016, net profit and return on equity for 2016 were presented also excluding the effects of the reduction of corporate tax (in addition to the exclusion of the update of the provisions in respect of the investigation, as noted). Within the process of preparation for filing a shelf prospectus of Hapoalim Hanpakot Ltd. (the issuance arm of the Bank, which is a company under full ownership), the Israel Securities Authority requested that the Bank present these data for 2016 in a manner that consistently applies the aforesaid excluded components. (1) Calculated on an annualized basis (2) Does not include expenses in respect of the update of the provision in connection with the Bank Group’s business with American clients, and costs in respect of the discontinuation of activity in Switzerland. (3) Financing profit from regular activity (see the Report of the Board of Directors and Board of Management, in the section “Material developments in income, expenses, and other comprehensive income”) divided by total financial assets after allowance for credit losses, net of non-interest bearing balances in respect of credit cards. (4) For additional information, see the section “Liquidity and refinancing risk,” in the Consolidated Financial Statements. (5) For additional information, see the section “Capital, capital adequacy, and leverage,” in the Consolidated Financial Statements.


Condensed financial information and principal performance indicators over time (continued)

	For the three months ended					For the year ended
						December 31
	March 31,	December 31,	September 30,	June 30,	March 31,	2017	2016
	2018	2017	2017	2017	2017
	NIS millions
Main profit and loss data
Net profit attributed to shareholders
of the Bank	628	612	469	812	767	2,660	2,628
Net profit attributed to shareholders of the Bank excluding extraordinary items⁽²⁾	688	908	861	812	767	3,348	***3,417
Net interest income	2,158	2,228	2,163	2,233	2,073	8,697	8,193
Provision (income) for credit losses	250	24	25	167	107	323	269
Net financing profit**	2,384	2,395	2,315	2,369	2,255	9,334	9,345
Non-interest income	1,533	1,474	1,477	1,453	1,529	5,933	6,528
Of which: fees	1,280	1,271	1,284	1,254	1,302	5,111	5,216
Operating and other expenses	2,353	2,607	2,607	2,185	2,217	9,616	9,490
Of which: salaries and related expenses	1,130	*1,115	*1,126	*1,132	*1,182	*4,555	*4,571
Total income	3,691	3,702	3,640	3,686	3,602	14,630	14,721

Net earnings per ordinary share
(in NIS)
Basic net earnings per share in NIS
attributed to shareholders of the Bank	0.47	0.46	0.36	0.60	0.58	2.00	1.98

* Reclassification of certain actuarial cost components of employee benefits from salary expenses to other expenses. For further details, see Note 1C(3) to the Condensed Financial Statements. ** Net financing profit includes net interest income and non-interest financing income (expenses). *** Restated for inclusion of the effects of the reduction of corporate tax as part of profit excluding extraordinary items in 2016. In the Periodic Report for 2017 (and the subsequently published presentation for 2017), net profit and return on equity for 2016 and 2017 were presented excluding expenses in respect of the update of the provision in connection with the investigation of the Bank Group's business with American clients and the discontinuation of activity in Switzerland only. In 2016, net profit and return on equity for 2016 were presented also excluding the effects of the reduction of corporate tax (in addition to the exclusion of the update of the provisions in respect of the investigation, as noted). Within the process of preparation for filing a shelf prospectus of Hapoalim Hanpakot Ltd. (the issuance arm of the Bank, which is a company under full ownership), the Israel Securities Authority requested that the Bank present these data for 2016 in a manner that consistently applies the aforesaid excluded components. (6) Calculated on an annualized basis. (7) Not include expenses in respect of the update of the provision in connection with the Bank Group’s business with American clients, and costs in respect of the discontinuation of activity in Switzerland.


Condensed financial information and principal performance indicators over time (continued)

	As at										As at December 31
	March 31,		December 31,		September 30,		June 30,		March 31,		2017		2016
	2018		2017		2017		2017		2017
	NIS millions
Main balance sheet data
Total assets	448,195		454,424		449,815		449,734		445,847		454,424		448,105
Of which: Cash and deposits with banks	78,148		86,114		85,606		81,959		77,088		86,114		80,378
Securities	61,538		65,442		64,196		70,499		74,894		65,442		71,449
Net credit to the public	284,103		278,663		275,505		272,949		269,982		278,663		271,957
Net problematic credit risk	7,249		7,092		7,430		7,469		8,018		7,092		7,600
Net impaired balance sheet debts	2,056		2,121		2,283		2,522		2,749		2,121		3,110
Total liabilities	411,979		418,420		414,070		414,105		410,769		418,420		413,880
Of which: Deposits from the public	344,810		347,351		342,747		340,768		337,518		347,351		338,502
Deposits from banks	3,602		4,149		3,544		4,329		4,199		4,149		4,377
Bonds and subordinated notes	26,214		29,058		29,411		30,736		31,171		29,058		33,560

Shareholders’ equity	36,084		35,863		35,591		35,458		34,909		35,863		34,047
Nonperforming asset balances (NPL)	2,015		2,110		2,209		2,601		2,997		2,110		3,507
Additional data
Share price at end of period (in NIS)	24.0		25.6		24.7		23.5		22.1		25.6		22.9


	For the three months ended										For the year ended December 31
	March 31,		December 31,		September 30,		June 30,		March 31,		2017		2016
	2018		2017		2017		2017		2017
Total dividend per share	18.35		14.08		24.37		22.98		3.1		64.53		51.44
(in agorot)*
Ratio of fees to average assets	0.28	%	0.28	%	0.28	%	0.28	%	0.29	%	1.14	%	1.18	%