Bank Hapoalim Q1 profit falls on US tax investigation provision
Bank Leumi’s first quarter profit up, to start buying back shares
Bank Hapoalim, the country’s largest lender, reported on Thursday a drop in quarterly net profit that missed analysts’ forecasts due to a provision related to an ongoing US tax evasion investigation.
The bank set aside an additional provision of NIS 60 million ($17m.) to cover a possible future settlement in the US probe, bringing its total provision to $365m.
It also booked a legal expense of NIS 87m. related to the investigation by the US Department of Justice and New York State authorities.
Hapoalim, which had legal expenses of NIS 89 in all of 2017, said talks were ongoing and could not give a timetable for a resolution, although it is hoping for a conclusion in 2018.
It earned NIS 628m. in the first quarter, down from NIS 767m. a year earlier and compared with the NIS 799m. forecast in a Reuters poll of analysts.
Net interest income rose to NIS 2.16 billion in the quarter from NIS 2.07b. a year earlier, while credit loss expenses jumped to NIS 250m. from 107m.
The bank said the increase in credit loss expenses stemmed from a NIS 3b. rise, or 4.8%, in corporate lending.
The gain in lending also pushed its core Tier 1 capital ratio to risk-weighted assets, a key measure of financial strength, down to 11.05% from 11.26% at the end of 2017.
Its non-performing loan ratio declined to 0.7% in the quarter from 0.75% in 2017 and 2.8% in 2013.
Hapoalim said it would pay a quarterly dividend of NIS 251m. million shekels, or 18.35 per share, representing a payout of 40% of net profit.
The bank’s shares were 1.5 percent lower in morning trade in Tel Aviv.
Its main rival, Bank Leumi, the country’s second-largest lender, reported a smaller-than-expected rise in first-quarter profit, and said it was commencing a share buyback plan.
Leumi said on Thursday it earned NIS 730m. in the quarter, up from NIS 622m. a year earlier. It had been forecast to earn NIS 769m., according to a Reuters poll of analysts.
The bank said it had completed preparations for a buyback of shares of up to NIS 700m. , and that it will distribute NIS 292m. in a quarterly dividend, equal to 40% of net profit.
Leumi plans to buy back its own shares between April 1, 2018 and March 31, 2019, subject to meeting a Tier 1 equity ratio of no less than 10.9%.
The bank’s Tier 1 ratio, which measures equity capital as a proportion of total risk-weighted assets, fell to 11.11% at the end of March from 11.43% at the end of 2017. (Reuters)