Bank Leumi Q3 profit beats estimates, raises dividend
Bank Leumi, the country’s second-largest lender, beat third-quarter net profit forecasts on Tuesday and doubled its quarterly dividend payout rate to 40% of profit.
Leumi earned NIS 820 million ($233 million) in the quarter, topping the NIS 686m. forecast by analysts in a Reuters poll.
Earnings fell from NIS 919m. a year earlier, but that had been boosted by a NIS 235m. insurance reimbursement relating to a fine paid to US authorities in a tax investigation.
The bank raised its quarterly dividend payout to 40% of net profit and said it would distribute NIS 328m. for the third quarter. In March, it adopted a dividend policy for the first time in six years and set a payout ratio of 20%.
“We had been arguing for over six months that our model for Leumi easily supports a 40% payout in the context of the bank’s careful growth path,” Barclays analyst Tavy Rosner said.
Net interest income fell to NIS 1.918 billion from NIS 1.97b., hurt by a negative consumer price index. Credit loss expenses fell to NIS 3m. from NIS 106m. a year earlier.
Rosner reiterated his “overweight” rating for Leumi, his top pick among the Israeli banks he covers. He said its high-quality loan portfolio had allowed the bank to post the lowest level of loan loss provisions in the sector.
“After years of careful capital build, we see the bank as well positioned to return to accelerated growth,” Rosner said. “We see the cost-cutting potential as highest at Leumi in the coming years. This should translate into the largest decrease in salary and related costs.”
Leumi’s shares were up 1.1% to NIS 19.13 in early trade in Tel Aviv.
The bank’s tier 1 ratio, which measures equity capital as a proportion of total risk-weighted assets, rose to 11.35% at the end of September from 11.15% at the end of 2016.
Leumi’s top rival, Bank Hapoalim, will report its quarterly results next week.